The FY2024 Budget Battle: The Impact of the Speaker Vacancy

On October 3rd, House Speaker McCarthy was removed from office with the successful passage of a historic motion to vacate the Speakership. The vote followed the passage of a continuing resolution which prevented a government shutdown by extending government funding at FY2023 levels until November 17th. As the clock winds down on the continuing resolution, following are both the unique and some all too familiar details about the FY2024 funding battle and the difficulties that lie ahead for finalizing a FY2024 spending bill.

• While the current leadership chaos in the House has all the elements of a Shakespearean drama about power, influence,  presidential politics and personal animosities, the underlying policy issue is the outsized national debt, now $33 trillion and the excessive deficits reaching new highs this year at $1.6 trillion in the first 10 months of the fiscal year. This debate  over FY2024 spending levels has put the nation on the precipice of default and on the brink of a government shutdown.
• McCarthy’s ouster as Speaker has put the US Congress into unchartered territory and is chipping away at critical time to work on the FY2024 budget, raising the specter of another possible government shutdown. Republican Rep. Patrick McHenry (NC), is now the speaker pro tempore and a vote is scheduled in the Republican conference for the next speaker, Wednesday October 11th. When a Speaker vote will go to the floor of the House remains uncertain, as does the amount of time needed on the floor to vote in a Speaker.
• Given the many hurdles that need to be overcome to reach agreement on an FY2024 spending bill in a few short weeks, a shutdown remains a possibility unless another short-term continuing resolution is agreed and extended beyond November 17th. While the full impact of the Speaker vacancy on Republican thinking is still unknown, another short-term continuing resolution is likely to hit headwinds again, since the bipartisan agreement caused McCarthy’s ouster and a number of House Republicans continue to think the current fiscal year levels of funding are too high, even for a shortterm extension. Only 9 Republicans voted for the full government funding bill in December of 2022 and 13 House Republicans have never voted for any kind of spending bill since 2011.
• The other alternative to avoid a shutdown is the passage of all 12 appropriations bills, by the House and Senate—which the clock has just about run out on again. No business can come before the House on the floor for votes until there is the vote to determine the Speaker.
• A third longer shot, more arcane, option is a discharge petition which would bring a resolution to the floor without any action required by the Speaker. This alternative to pass an FY2024  spending bill, cannot even be considered until there is a Speaker and there are important hurdles to this approach, including time and the need for support from 5 Republicans.
• What has made compromise on the passage of a full year budget even more difficult this year is the fallout from the earlier compromise this year to avoid a US government default. After enactment of the CED Policy Backgrounder – 2 Fiscal Responsibility Act in June, House Republican Appropriators immediately rejected the compromise funding levels in the FRA and started from lower baseline numbers. The Senate “topline” appropriations figure is $1.59 trillion for all 12 appropriations bills, the figure agreed in the debt ceiling negotiations. The House, in contrast, is at $1.47 trillion for its “topline” number.
• Given McCarthy’s ouster over his compromise on a continuing resolution to keep the government open, the traditional route of resolving the budget battles through bi-partisan agreement is that much more difficult for the next Speaker.
• Looking beyond a short-term, stop gap measure, there is also no clear pathway for agreement on a FY2024 budget. Even if a FY2024 budget can be agreed upon between the House and Senate, a number of Republicans have also made it clear that they will not vote on an “omnibus” FY2024 funding bill, which includes all the appropriation bills in a mega bill. They want individual votes on each appropriations bill, as agreed in January and codified again in the Fiscal Responsibility Act.
• A long-term continuing resolution that would last through FY2024 that would simply extend the FY 2023 funding levels—also an alternative that has been used in the past--will be difficult to impossible. The Fiscal Responsibility Act includes a provision that If Congress does not pass all 12 appropriations bills by the end of December, this bill mandates a 1 percent budget cut that would apply to defense and non-defense spending. At this time, this across the board cut scenario is a likely outcome.
• The economic damage caused by a shutdown depends on the length and scope of the shutdown. With no appropriation bills signed into law and no clear pathway to agreement on an FY2024 funding bill—the scope is broad across government agencies and activities. And the length could be weeks long to the trigger date for the across the board cut January 1st. The shutdown controversy foreshadows that there is no clear pathway to reopening the government should it shutdown in November.
• US global leadership is not immune to impact. Moody’s has warned along with Wells Fargo that a government shutdown could harm the U.S. credit rating and dollar. The controversy over Ukraine funding is causing concern about the US longer-term commitment and leadership in the war.
• While the consequences of the budget stand-off this year are foreboding, the struggle has resulted in bipartisan coalescing both in the House and the Senate. Among the proposals is the recognition that it is necessary to reform the budget process and address our outsized national debt through a bipartisan Fiscal Responsibility Commission, a long-standing CED recommendation. Overall reform needs to be a top priority and part of an outcome of this current year budget crisis.