When Congress returns Monday from its summer break, lawmakers must quickly forge a deal to avoid a government shutdown and then pivot to raise the government’s borrowing authority by mid-October or face a damaging U.S. debt default.
Those fights were complicated enough before President Barack Obama announced he’d seek congressional approval for a military strike against Syria. Now, the Syria debate eats into what little time is available for a budget deal. And that’s on top of a more complicated political and fiscal landscape than a year ago, including huge differences in competing spending plans, a changed tax landscape and new political calculations.
The fiscal year ends on Sept. 30, with the government having spent about $3.45 trillion, just a tad lower than spending in 2010. Absent some sort of a deal to fund government starting Oct.1, there could be a shutdown.
During the last budget battle, the Republican-led House of Representatives and the Democrat-led Senate were about $29 billion apart in their proposed spending plans. This time they are $91 billion apart.
Lawmakers might opt instead to continue government spending on a temporary basis to avoid a shutdown. That would likely leave in place the so-called budget sequester and the scheduled $109 billion of new across-the-board cuts in federal spending in the coming fiscal year.
Just days later, another crisis looms. Treasury Secretary Jacob Lew sent a letter on Aug. 26 to congressional leaders warning that the government will hit the $16.39 trillion debt ceiling – the cap on the federal government’s borrowing authority – around the middle of October. The government would then be unable to borrow to pay all the bills already racked up. That would trigger a default and a lowering of the U.S. government’s credit rating, raising the cost of future borrowing and potentially sparking financial turmoil.
House Speaker John Boehner, R-Ohio, has promised “a whale of a fight” over raising the debt ceiling, insisting on spending cuts or reforms equal to or greater than the amount of any new borrowing allowed.
Obama administration officials have met quietly behind closed doors since early summer with a group of Republican senators to try to find a compromise on budget, deficit and debt issues. The two sides last week abandoned the talks.
One complicating factor is that the last budget deal, on New Year’s Day, now clouds the current talks, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for lower deficits and debt.
The deal raised taxes on the wealthiest Americans and extended jobless benefits for 2 million long-term unemployed. Republicans who agreed to the tax increase then are unlikely to do so again.
“It’s made things more difficult,” MacGuineas said.
Returning lawmakers have about three weeks to come up with a budget for the fiscal year that begins Oct. 1.
“Suffice it to say that threatening to shut down the government would have a terrible impact on our economy,” said White House spokesman Josh Earnest. “Threats to shut down the government would only undermine the economic recovery that’s starting to gain some traction.”
With congressional leaders dug in, a solution may have to come from Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, and Rep. Chris Van Hollen of Maryland, the committee’s top Democrat. For now, Ryan, viewed as a top-tier GOP presidential candidate, is sticking to familiar themes.
“Chairman Ryan believes we need to give real relief to American families,” said William Allison, Ryan’s spokesman. “This fall, he’s hopeful we will delay Obamacare, pay down the debt and help grow the economy.”
In an interview, Van Hollen said there have been no back-channel talks with Ryan and pointed to deep divisions in the House Republican caucus.
“They’ve got no authority from their caucus to negotiate anything,” he said. “They can’t deliver.”
The fiscal fights also come just as the 2014 election season begins. Money is pouring in to campaigns. Candidates are entering races, defining who faces tough challenges next year and who doesn’t. The next round of congressional budget votes will be felt back home next year, especially defense cuts that are expected to be felt more in the sequester’s second year.
“This rolling, cumulative impact is what I hope will get to . . . members,” said Steve Bell, a senior expert at the Bipartisan Policy Center, a think tank that has provided a roadmap for budget compromises.
One example of the political squeeze is Senate Republican leader Mitch McConnell of Kentucky, who faces re-election next year.
Conservatives warn that too much compromise could mean a rough time for McConnell in next year’s primary against Louisville businessman Matt Bevin.
“Mitch McConnell has cut deals with President Obama to raise the debt limit, increase taxes and fund Obamacare, and we believe Republicans in Kentucky deserve a chance to elect a true conservative who will fight for their values,” said Matt Hoskins, executive director of the Senate Conservatives Fund, adding that the fund is “open to supporting Bevin.”
But if McConnell distances himself from crafting a compromise, he could face a different political dilemma. Should he win the primary, he’d probably run against Kentucky Secretary of State Alison Lundergan Grimes. Democrats have labeled her effort their top Senate priority next year.
Democrats control 54 of the Senate’s 100 seats – expected to grow by one next month if New Jersey’s Cory Booker wins a special election. But the six to eight most vulnerable Senate seats next year are held by Democrats, most of them in conservative states.
In Arkansas, for instance, Democratic Sen. Mark Pryor is likely to face Republican Rep. Tom Cotton, and the conservative Club for Growth vows a vigorous battle.
“Cotton has been stellar on the issues Club members care about. He opposes wasteful government spending, fights to repeal Obamacare, and will never vote for an anti-growth tax increase,” the club said in a statement.
House Republicans hold a 33-seat edge, and analysts don’t see Democrats winning back control next year. Republicans could stumble, though, if they appear as if they’re promoting fiscal chaos. Leaders vividly remember how the party was blamed for the 1995-96 government shutdown, giving President Bill Clinton political momentum he never relinquished.
“The parties are acutely concerned about how much blame they’re going to face if they don’t come to the table,” said Sarah Binder, a congressional expert at the center-left Brookings Institution. “The more blame you face, the less negotiating power you have.”
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