By Ryan Boyle

As a team, we resolved to share a quiet week to end the year, with no publications or other requirements to work.  The timing was good: economic news was sparse at the end of 2023. But we were disappointed to see that members of Congress also took a holiday reprieve.  Yet another federal government shutdown is fast approaching, and a deal to avoid it seems to be nowhere in sight.

To recap: The Fiscal Responsibility Act (FRA) which ended the debt ceiling standoff last June  included broad guidelines for spending in fiscal year 2024.  However, the FRA was not a firm budget, and haggling ensued over details.  Just before a shutdown was to begin on October 1, Congress passed a continuing resolution (CR) of the 2023 budget. That bridge only lasted seven weeks, though, and a new, staggered CR was passed carry on into the new year.

Without a new budget or another continuing resolution, the federal government will enter a partial shutdown on January 19, and a full shutdown on February 2.

Cessation of all nonessential services beginning in February would be highly disruptive, especially to hundreds of thousands of furloughed government workers. Further, the FRA stipulated that if budget negotiations were still at an impasse in April, 1% across-the-board cuts will become effective for all discretionary spending—including defense spending, an unpopular prospect. 

Sticking points in current negotiations include funding for border security and support for the efforts in Ukraine and Gaza.  While these are hot-button issues, the amounts under debate are minute relative to total discretionary spending of $1.7 trillion in fiscal 2023.  The battle over discretionary spending misses the more worrying trajectories of costs for interest and mandatory programs.   

At least a partial shutdown looks likely: there are only eight legislative days before the January 19 deadline.  Agency closures at that time will be limited and less essential; the broader closures at the beginning of February would be much more impactful.  There is still room for cooler heads to prevail: shutdowns reflect poorly on both parties, an outcome to avoid in an election year.  And the 1% sequester in April is a recent, self-imposed rule that Congress can revise.

We never expected the relaxation of our week away to last long.  Now, it’s back to the grind of following tense negotiations and last-minute dealmaking.