Congress Faces Pre-election Budget Vote to Avoid Government Shutdown

08/30/2024|3 minute read

The presidential campaign is in full swing, but attention will turn to Capitol Hill after Labor Day as Congress has one important task to accomplish before the November elections.

Funding for the government expires September 30. If Congress doesn't pass fiscal 2025 spending - or a stopgap budget called a "continuing resolution" - the government would shut down October 1. That would be politically calamitous for Republicans, who are battling to cling to their wafer-thin House majority.

The House is in session for only 13 days in September, so lawmakers will face immediate pressure as soon as Congress reconvenes from its summer recess September 9.

Here's a quick budget primer:

The federal government's total budget in fiscal 2023 was $6.1 trillion, according to the Congressional Budget Office. Spending falls into three principal buckets: discretionary spending, mandatory spending and interest payments on the national debt.

For discretionary spending, Congress funds the government in 12 separate appropriations bills, which totaled about $1.7 trillion in fiscal 2023. Of that amount, defense spending accounted for $805 billion, and everything else - from agriculture and education to healthcare and environmental protection - was $917 billion.

For mandatory spending, Congress doesn't vote on this funding; it occurs automatically based on eligibility. These programs include Social Security ($1.3 trillion), Medicare ($839 billion), Medicaid ($616 billion) and other programs such as veterans' healthcare and agriculture subsidies ($950 billion).

Finally, the government spent $659 billion on interest payments on the national debt in fiscal 2023, which today is more than $35 trillion, or $104,773 (as of this writing) for every person in America.

Why is there an annual budget deficit? Spending ($6.1 trillion) exceeded tax revenue ($4.4 trillion) in fiscal 2023, producing $1.7 trillion of red ink just in that one fiscal year.

So what about this year's budget that starts October 1? Will partisanship and political dysfunction on Capitol Hill trigger a government shutdown this fall?

Because of political differences between House Republicans and Senate Democrats, lawmakers are unlikely to approve any of the 12 appropriations bills by the September 30 deadline. Still, Congress can avoid a shutdown by approving a continuing resolution - which would merely extend current-year funding levels and programs for a set period.

Congress in September is likely to pass a continuing resolution for fiscal 2025 funding, but the duration of that stopgap budget and whether non-spending provisions will be included are outstanding questions.

Generally, congressional Democrats favor a "clean" continuing resolution, which does not include funding or policy changes. Some Republicans, however, want to use the leverage of a potential shutdown to advance favored policies unrelated to the budget or spending. For example, some conservatives want a continuing resolution to include language requiring proof of U.S. citizenship to register to vote.

The Freedom Caucus - a group of a few dozen House conservatives - wants a continuing resolution to extend into spring 2025, arguing that bypassing a post-election lame duck session would tee up appropriations decisions for a second Trump administration. But that strategy ignores an obvious downside: the non-zero chance that Democrats control both the White House and Congress in 2025, which would leave congressional Republicans on the outside looking in as Democrats make all the spending decisions.

House conservatives are also lobbying their leadership to reduce appropriations below the top-line numbers set in last year's Fiscal Responsibility Act. Democratic leaders are adamant a continuing resolution should keep to the $1.68 trillion funding level for discretionary spending established in the June 2023 budget agreement, and Democrats also object to GOP policy riders.

Because of internal political divisions among House Republicans, the GOP has struggled this summer to pass the 12 individual appropriations measures - votes on seven of the spending bills have either been delayed or resulted in defeat in the House. That internal discord likely will leave party leaders with no option but to embrace a continuing resolution that adopts the Fiscal Responsibility Act's spending levels. Any added policy provisions or emergency spending would necessarily need to be bipartisan to win approval in the Democratic-controlled Senate.

While it is possible a continuing resolution could last until early 2025, we believe a more likely scenario is that it would expire in December, giving both parties flexibility to react to November election outcomes.

So while it is possible the government shuts down beginning in October, we think that is not likely, mostly because it would signal a complete breakdown by House Republicans with profoundly negative implications for GOP candidates in November. Party leaders will pull out all the stops to not let that happen - even if it means partnering with Democrats to pass a clean continuing resolution free of conservative non-spending issues.

But don't breathe a sigh of relief yet: September is just the amuse-bouche of fiscal deadlines. In 2025, Congress and a new president will have to act to avoid $4.6 trillion in scheduled tax increases from expiring provisions of the Trump-era Tax Cuts and Jobs Act, a key vote to raise the government's authority to borrow even more money and add to the debt, and other appropriations deadlines to keep the government funded.

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