Federal Government Moves Closer to Shutdown at Friday Midnight:
- Administration/GOP insisting on the 4-week continuing resolution passed by the House last night. Bill Text Section-by-Section Summary CBO cost estimate
- The GOP measure would:
- Continue funding for federal programs and agencies through Feb. 16 (aiming to complete action on an FY'18 spending bill before President's Day recess);
- Delay several ACA taxes at a cost of $30 billion (suspends for 2018 and 2019 the 2.3% medical device excise tax for another two years, delays to 2022 the so-called "Cadillac tax" on high-cost employer-sponsored health plans for two years, and suspends for 2019 an annual excise tax on health insurers); and
- Reauthorize for 6 years the expired Children's Health Insurance Program (CHIP) -- a jointly financed Federal-State program that covers 9 million low-income children from families that have annual incomes above Medicaid eligibility levels but lack health insurance.
- Democrats want a short-term extension for several days to allow time to negotiate protections for 800,000 "Dreamers" from deportation under Trump's phase-out of the Deferred Action for Childhood Arrivals (DACA) program. Democrats also want disaster aid, and funding for community health centers included.
- Negotiations on the broader government-wide spending bill for the remainder of FY '18 continue to be mired in disagreements over:
- Appropriations Portal: link to our Appropriations Portal for background and details on the "parity" issue, discretionary spending caps, FY'18 continuing resolutions, and other appropriations developments.
What Happens When the Government Shuts Down?
- LINK TO FedWeb's UPDATED SHUTDOWN PAGE
- The government is facing a shutdown at Friday midnight because full-year appropriations for FY 2018 (which began Oct. 1, 2017) have not been enacted due to disagreements on total spending levels, and the latest stopgap measure to continue funding at last year's levels (known as a "continuing resolution") expires Friday night.
- Why does the government have to shut down? The Anti-Deficiency Act of 1870 (31 U.S.C. 1341-42; 1511-1519) makes it strictly illegal for any government official to make payments or enter into contracts in excess of congressional appropriations. The purpose is to enforce Congress’ constitutional authority over the public purse and the result is to require government shutdowns when appropriations lapse. Background on Anti-Deficiency Act
- When was the last shutdown? There was a 16-day shutdown in October 2013.
- What was the longest shutdown? The longest shutdown was 21 days in 1995-96.
- What happens when the government shuts down? Federal agencies must discontinue all "non-essential" functions and furlough all "non-essential" employees. Each agency develops its own shutdown plan following guidance released by the White House Office of Management and Budget (OMB); here is a link to current shutdown plans. In general, "essential services" are those related to the "safety of human life or the protection of property" and those services continue to be operated by federal employees classified as "essential" -- with back salary and contract payments made only when appropriations are eventually enacted.
- Entitlement benefits that are permanently appropriated, such as Social Security, Medicare, and Medicaid, continue to be paid although services such as new enrollments or fixing benefit problems might cease (depending on what OMB deems "essential").
- Examples of government functions that might stop (the precise impact is uncertain since each Administration's OMB makes the final determination on what is to be deemed "essential" for the safety of life or the protection of property):
- NIH may discontinue processing medical research grants.
- Private-sector lending may be disrupted, because banks and mortgage providers cannot access government income and Social Security Number verification services.
- Import and export licenses may be put on hold, negatively impacting trade.
- Tax refunds may be delayed.
- Government contractors experience delays (2013 shutdown).
- Federal permitting and environmental reviews may stop, delaying transportation, energy and infrastructure projects.
- FDA and EPA may cancel health and safety inspections at food processing and water plants, chemical plants, and hazardous waste sites.
- Federal loans to small businesses, homeowners, and families in rural communities may stop.
- Travel and tourism is disrupted at national parks and monuments hurting the surrounding local economies.
- What happens to federal employees? Non-essential employees are furloughed and "essential" employees are not paid until appropriations are enacted. Historically, Congress has granted back pay to furloughed employees, but it is not guaranteed.
- Do shutdowns save money? No. OMB estimated that the 2013 shutdown resulted in: $2 billion in lost worker productivity and the federal government had to pay interest on late payments to contractors.
House GOP Backs Away from Social Security and Medicare Cuts:
- In a major policy reversal, House Speaker Paul Ryan. speaking at a WisPolitics event at the University of Wisconsin-Madison on Friday, Jan. 12, 2018, said regarding Social Security and Medicare cuts/reforms, "I don't see us tackling it this year."
- It is not clear, if Ryan is also backing away from promised Medicaid cuts. On a related issue, Kaiser released a report on Medicaid work requirements.
- Speaker Ryan had said on Dec. 6, 2017, “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” signaling a renewed effort to make deep cuts in Medicare, Medicaid, and other entitlements.
- Ryan's December statement promising entitlement cuts was contrary to the promise of Candidate Trump in June 2015 to “save Medicare, Medicaid and Social Security without cuts.”
Debt Ceiling May Need to be Raised by Early March:
- The recent suspension of the debt ceiling expired December 8, 2017. CBO had projected late last year that after Dec. 8th, Treasury's "extraordinary measures" to raise cash "would probably be exhausted in late March or early April.” However, a recent private sector report projects the drop-dead date may arrive in early March.
- Failure to raise the debt ceiling would result in a default by the U.S. Treasury. Default has never occurred and would have catastrophic effects on the ability of the U.S. Treasury to issue bonds in the future, as well as destabilizing global financial markets.
- Background: Debt Ceiling.
- Background: Main drivers of America's Increasing Debt
Deficits Returning to $1 Trillion/Year; and Total Debt Nearing 100% of Economy
ACA Cost-Sharing Reduction Payments End:
- ACA cost-sharing reduction (CSR) payments ended in December, without congressional action on the Alexander-Murray Bipartisan Health Care Stabilization Act of 2017. There are, as yet, no reports of plans to advance the legislation, despite promises to Senate moderate Republicans during the tax debate.
- CBO projects termination of the payments will destabilize health insurance exchanges, increase premiums, and increase federal deficits $200 billion. More on CSR payments and ACA.
Disaster Aid Stalled:
- House passed an $81 billion bill for hurricane and wildfire victims in December, but the Senate did not take up the measure due to concerns it didn’t do enough to help California, Puerto Rico, and the U.S. Virgin Islands.
- NOAA reports that Hurricanes Harvey, Irma, and Maria, together with western wildfires and other natural disasters, causes $306 billion in U.S. damage -- the most expensive year on record. Scientists fear climate change could increase extreme weather. More details on disaster aid.
- Senate could vote this session on S. 2155, a bill to exempt small and mid-size banks from Dodd-Frank, although Democrats are split on the bill negotiated in committee, and House conservatives want a bill that places restraints on the Consumer Financial Protection Bureau (CFPB).
- Background on Dodd-Frank and financial regulations.
Tax Regs/Legislation in 2018:
- Technical corrections legislation is likely in 2018.
- Drafting of rules and regulations to implement last year's Tax Act (TCJA).
International Trade in 2018 (links to key issues):
- In the wake of 2017 actions by the Trump Administration sidelining multilateral T-TIP negotiations with Europe and withdrawing from TPP in Asia, Europe and Japan are increasingly taking the lead in trade, the WTO is facing uncertainty, the U.S.-Korea (KORUS) trade deal is under review, and tensions could erupt with Mexico and Canada if the Administration terminates NAFTA (which some sectors fear could impact U.S. jobs and raise prices). Tensions could also increase in 2018 with China over: currency manipulation, trade with N. Korea, or the U.S. blocking a key merger. See our new Trade webpage.
Foreign Policy and National Security in 2018 (links to key issues):