So we're having another budget showdown. Really?
Gah, well, let's get it over with then. What's the deadline this time?
Sept. 30! If Congress doesn't pass anything before the clock strikes midnight and October begins, the government will shut down.
So what happens then?
The continuing resolution that's been funding the federal government since March expires.
What's a continuing resolution?
It's a bill that tells the federal government's agencies, "Keep on spending like you've been spending till we can actually come to some agreement on how much you should be spending." It's what Congress passes when they can't pass appropriations bills.
What are appropriations bills?
The short version is they're the bills Congress uses to make its budget real. The long version requires explaining the whole budget process. Here's how it's supposed to work, in theory. Feel free to skip to the next section if you don't want all the gory details.
First, each fiscal year, the president submits a budget request to Congress, laying out how much he wants to spend on each department and agency, how much revenue he wants to raise and from what taxes he wants to raise it. Technically the president is legally required to do this no later than the first Monday of February, but President Obama has frequently missed that deadline.
Second, the House and Senate budget committees each draft and pass budget resolutions laying out spending authority for the next fiscal year, and spending/revenue levels for the next five years. They also set totals for revenue and spending for the entire budget. The House and Senate as a whole pass their resolutions, which then go into conference. Once a joint resolution is hashed out, both houses pass it. The resolution doesn't have the force of law, as the president never signs it, but rather constrains congressional debate on the budget from there on out. If a House or Senate member tries to pass a bill that goes against the budget resolution, another member is able to raise a point of order and block them from doing so.
Third, the House and Senate appropriations subcommittees (12 in total in each house) draft and pass 12 appropriations bills (one per committee) addressing their given areas of specialization. Those pass the full House and Senate, go to conference committee, and then the compromise version worked out there passes each house and is signed into law by the president. This is supposed to start in May and conclude before Oct. 1, the start of the new fiscal year for which the budget resolutions and appropriations bills were written, but in practice it's rarely completed in time.
The whole process is well-summarized by this flow chart from the National Priorities Project:
Great, that was a fun diversion. But I still don't really get what a continuing resolution is.
I'm getting to that, I swear! So you know those 12 appropriations bills the House and Senate are supposed to pass and then send along to the president? Well, they're often not passed in time. When that happens, Congress keeps the government humming through continuing resolutions. Those can be passed for a single appropriations category (defense, say) or all 12 — what exactly is affected is called the continuing resolution's "coverage." And they've been used a lot of late, despite the GAO's finding that they reduce the quality of government services, as this National Journal chart illustrates:
So what does the current continuing resolution do?
It kept funding constant from March 28 through Sept. 30, but didn't specify what happens after that. If we don't do anything before then, the federal government will shut down.
Just like when we almost didn't raise the debt limit, right?
Not like that, actually. That would have led the United States to default on its debts, which would have forever damaged our credit standing; even a very short default in the late 1970s, brought about by a technological glitch, has permanently raised the cost of U.S. government borrowing. A real default would be an unprecedented event in American history -- and a terrifying event for global financial markets.
Government shutdowns are different. That's when the government doesn't have the money to buy anything new, as opposed to the money to pay the debts it's already incurred. We had a government shutdown as recently as 1996, when a showdown between House Speaker Newt Gingrich and President Bill Clinton ended in two brief government closures (lasting from Nov. 14 through Nov. 19, 1995. and from Dec. 16, 1995, to Jan. 6, 1996). They're not nearly as catastrophic as a debt default would be.
Well, that's a relief. So we've got nothing to worry about, eh?
No! I said "not nearly as catastrophic as a debt default," which is like saying a skin disease isn't nearly as bad as septic shock. Government shutdowns are still bad. For one thing, they actually cost money. You need someone to change all the government Web sites to say "closed," and to e-mail employees about when they're working. You need someone to handle federal employees transitioning off government benefits. You need security guards to make sure that unmanned offices full of sensitive data aren't broken into.
That adds up. The OMB estimates that the two government shutdowns in the 1990s cost more than $2 billion in current dollars.
They also hurt government workers. The 1995-96 shutdowns also led to a temporary loss of income for federal workers and a permanent one for government contractors. "For more than 20 days, about 260,000 federal employees in the D.C. area stayed home, or reported for duty only to be sent packing hours later," the Post's Ed O'Keefe explains. "Agencies retroactively paid workers once the doors reopened, but many government contractors -- paid separately by private employers -- earned nothing during the shutdown."
Gail Russell Chaddock at the Christian Science Monitor puts the national employee furlough number from the 1995-96 shutdowns at 800,000, and notes that the shutdowns "delayed processing of visas, passports, and other government applications; suspended cleanup at 600 toxic waste sites; and closed national museums and monuments as well as 368 national park sites -- a loss to some 9 million visitors and the airline and tourist industries that service them."
And, of course, they hurt the people who rely on the government. Rep. Rush Holt (D-N.J.) has a good list of other likely effects of a government shutdown. Federal funds to help states pay unemployment benefits could be affected, veterans' benefits could be delayed or cut (as happened last time), IRS tax-refund processing for certain returns would be suspended, new FHA home loan guarantees could cease, farm loans and payments would stop, and Small Business Administration approval of business loan guarantees and direct loans would probably cease.
Self-funding agencies like the U.S. Mint and the Postal Service would stay open during a shutdown, and the president, Congress and employees "deemed to perform emergency work involving saving lives or protecting property, including military service, law enforcement, or direct provision of medical care" are exempted from furloughs. The FAA's air traffic control operations would continue unabated and while new applications wouldn't be accepted, Social Security checks would go out per usual.
So what do the two parties want out of a continuing resolution?
The main difference between the parties' starting positions is on discretionary measures. The White House and Senate Democrats want to spend $1.058 trillion on discretionary measures in fiscal year 2014. Paul Ryan and House Republicans want to spend $967.5 billion.
However, if the levels the White House and Senate Dems want are passed, discretionary spending will still total $967.5 billion, because of sequestration caps. The Senate Democrats and White House want to repeal the sequestration so as to allow for the higher $1.058 trillion amount, but if they fail to, then the caps — $498.1 billion for defense spending and $469.4 billion for non-defense — take effect.
The Ryan budget, by contrast, would spend $552 billion on defense and $414 billion on other discretionary programs. Doing that would require changing the defense/non-defense caps; otherwise, defense spending would be automatically reduced to $498.1 billion. But even with the caps adjusted, the Ryan budget adheres to the $967.5 billion total cap for discretionary spending currently in effect. It just does so by cutting a lot more from non-defense programs than a sequester-impacted Democrat budget would:
Got it. Have they worked out a deal on that?
Sort of. House Speaker John Boehner offered $988 billion in total discretionary spending to Democrats — above the 2014 cap under current law but equivalent to 2013 post-sequester total discretionary spending. This chart from CAP summarizes the Boehner proposal well:
The Boehner proposal keeps non-defense spending at the sequestration cap (so below the Democrat level and significantly above Ryan's) but boosts defense spending a bit above the cap. The plan would be paired with a measure that would force the Senate to vote on defunding Obamacare. Senate Majority Leader Harry Reid appeared to be grudgingly on board.
Hooray! So we have a deal, right?
Yeah, right. The conservative flank of the Republican party attacked the Boehner plan as not truly defunding Obamacare. So it's basically dead. Instead, Republicans are flocking to a plan by Rep. Tom Graves (R-Ga.) that would delay Obamacare implementation to 2015 while keeping to the $967.5 billion spending limit. That seems clearly DOA in the Senate and with the president.
Meanwhile, House Republican leaders are trying to convince their members that the debt ceiling, which needs to be raised next month, is a better fight, because the stakes are considerably higher.
Are the White House and Boehner negotiating yet?
Not yet. But don't be surprised if that starts soon. We're only two weeks from doomsday, and Boehner knows all too well the damage that the 1995-96 shutdowns did to his predecessor, Gingrich. Whether his caucus will accept a deal he cuts with Obama, however, is another question.