Odds of an October Shutdown Down to 10 Percent

Discretionary spending has declined sharply, from a peak of $1.347 billion in FY11, to approximately $986 billion this year.  The FY14 House Republican Budget Resolution seeks to further cut discretionary spending, to $967 billion, with the bulk of the cuts targeted at non-defense agencies, in the cases of some departments by more than 20%.  Late last month, House Republicans appropriators postponed a markup of the Labor-HHS-Education bill, which would have cut of 23% from the current spending level. At the same time, the House budget would increase spending on defense, and to a lesser extent on homeland security, military construction, and veterans.

The FY14 Senate budget resolution provides for $1.058 billion in discretionary spending, a difference of $91 billion with the House budget resolution, but the chamber has failed to pass a single appropriations bill.  Bridging that gap in order to pass even a continuing resolution for FY14 remains a significant challenge, but perhaps no more so than the gap within House Republicans, between fiscal hard liners on the one hand, and moderates and appropriators on the other.

While House Republicans had little difficulty passing generous spending bills on defense, military construction, and homeland security, the challenge of passing draconian spending bills for non-defense came into full public view just prior to the August recess, when leaders were forced to pull the Transportation-HUD bill from the floor.  The $44 billion appropriations bill was a full $10 billion below the Senate level, and advocates believed that passing the bill would strengthen their position in upcoming negotiations over the FY14 continuing resolution.  Instead, it underscored the rift between fiscal hard liners and moderates, with the House leadership caught in the middle.

Complicating matters even further is a recent effort by a group of House Republican conservatives, including tea-partiers, to hold the continuing resolution hostage to defunding Obamacare.  Recent reports suggest, however, that the leadership has succeeded in convincing the hard liners that a government shutdown would be harmful to the larger interests of the party.  If party leaders have not been successful, Speaker Boehner will face the very difficult decision of whether to proceed without having secured a majority of the majority, thereby abandoning his pledge to not violate the Hastert rule, or to allow the hard liners to hold sway.

An obvious alternative would be to stage yet another, separate vote to defund Obamacare, except for the fact that they’ve already had at least forty of those, so even their symbolic value has declined.  Another, perhaps more likely alternative would be to include a defunding provision in the House version of the CR, with the understanding that they’ll not insist on its inclusion in conference with the Senate.

Assuming that ­defunding Obamacare is removed from the CR equation one way or another, there’s still the matter of agreeing on a spending level, given the $91 billion difference between the House and Senate budget resolutions.  The reporting suggests that the leadership as well as majorities in both chambers appear willing to settle on $988 billion in discretionary spending, which is the FY14 Budget Control Act (BCA) level without the sequester.  Republicans are unlikely, however, to agree to more than a two or three month CR.

Republican conservatives who are demanding that defunding Obamacare be included in the CR are unlikely in any case to support a bill at the $988 billion level, and will continue to advocate for the $967 billion level in the House budget resolution, which is the BCA number with the sequester.  If the moderates succeed in passing a short term CR at the $988 billion level, or even at a lower level, there’s little doubt that conservatives will use the need to raise the debt limit, expected to be at the beginning of November, to again push their demands.