White House Commences Shutdown Plans as Democrats Block Funding

The US government hurtled toward a Wednesday shutdown as Democrats blocked a Republican stopgap funding package that didn’t address their demands, the latest sign that neither party was likely to fold in the final hours before a federal funding deadline.

With no more votes planned in the Senate before a midnight deadline, the White House’s Office of Management and Budget instructed government agencies to “execute their plans for an orderly shutdown.”

Congressional Democrats and President Donald Trump dug in Tuesday on a confrontation over health-care spending, fueling an imminent shutdown risk that appears certain to disrupt national services, furlough federal workers and interrupt the flow of critical data on a murky economy.

Trump and congressional leaders showed no outward signs of working toward a deal or a face-saving off-ramp. Instead, both sides concentrated their public comments throughout the day Tuesday on blaming each other for the funding lapse.

One final vote on a stopgap spending bill failed on a vote of 55 to 45 Tuesday evening, with Republicans falling short of the 60 senators needed to overcome a Democratic blockade.

Read more: Democrats Leverage US Shutdown to Try to Dent Trump’s Dominance

Government funding expires at midnight. Essential workers like military troops will work without pay while non-essential federal employees are set to be furloughed.

As many as 750,000 federal workers could be temporarily furloughed, even if Trump doesn’t proceed with permanent dismissals, the nonpartisan Congressional Budget Office estimated.

The president raised the stakes in the fight, telling reporters Tuesday his administration may permanently fire “a lot” of federal workers in the event of a shutdown. The federal government typically has temporarily furloughed workers during a funding lapse and later given them back pay when the shutdown ends.

The Senate vote fell largely along party lines with Democrats Catherine Cortez Masto of Nevada and John Fetterman of Pennsylvania supporting it, along with Angus King, a Maine independent who caucuses with Democrats. Senator Rand Paul of Kentucky was the sole Republican to vote against it.

Minutes before, lawmakers also rejected a Democratic measure to extend government funding along largely party-line margins.

US stock moves were tepid Tuesday, oscillating between small gains and losses for hours before closing with S&P 500 up 0.4%, as the prospect of a shutdown stoked concerns that delayed release of economic data would cloud the Federal Reserve’s path of interest-rate cuts. Among the data likely to be affected is Friday’s crucial jobs report.

Read more: Traders’ Guide to US Markets If the Government Shuts Down

A shutdown would be the first since 2018-2019, when funding for the government lapsed for five weeks, spanning New Year’s Day, during Trump’s first term.

Democrats are demanding the renewal of expiring subsidies for Obamacare health insurance premiums in return for their votes for a temporary funding patch and provisions to stop Trump from unilaterally withholding congressionally approved spending. They also want to reverse Medicaid cuts included in Trump’s signature tax legislation passed earlier this year.

Some moderate Republicans have said they are interested in extending the ability of middle-class tax payers to use the Obamacare subsidies but would seek to place new income limits on eligibility.

House Speaker Mike Johnson and conservative Republicans are more skeptical of an extension, arguing that they just funnel money to insurance companies and the subsidies were meant to expire with the Covid pandemic.

Trump and Republican congressional leaders have said Democrats should not withhold support from funding the government to try to extract concessions on health care.

Democrats “are taking a risk by having a shutdown,” Trump said at a mid-day Oval Office event. “We’re not shutting it down. We don’t want to shut it down because we have the greatest period of time.”

But Senate Democratic leader Chuck Schumer said his party wouldn’t be bullied into accepting the GOP stopgap bill.

Schumer will have to maintain support for the blockade among vulnerable Democrats wary of a public backlash against disruption of public services. In a March shutdown standoff, nine Democratic senators including Schumer backed off and voted to advance a stopgap through Sept. 30.

Republican Senate Majority Leader John Thune said the Senate will take repeated votes on a short-term spending bill to reopen the government.

Senator John Barrasso, a member of Republican leadership, said the chamber would take a break for the Yom Kippur holiday this week if there is a shutdown but then return to Washington and vote through the weekend.

OMB Director Russell Vought, in his memo to federal agency leaders, said it’s “difficult to predict” how long the shutdown will last.

(Updates with OMB shutdown guidance starting in second paragraph.)

--With assistance from Laura Curtis.

To contact the reporter on this story:
Erik Wasson in Washington at ewasson@bloomberg.net

To contact the editors responsible for this story:
Megan Scully at mscully32@bloomberg.net

Mike Dorning, Derek Wallbank

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