One last bit of pre-election lawmaking is now complete after Congress staved off a shutdown and funded the government for three months.
“I want to thank both houses of Congress,” President Joe Biden said in a statement “for this bipartisan agreement and for avoiding a costly government shutdown.”
But the reprieve will be short-lived, with the plan now setting up lawmakers to be right back in the middle of multiple spending fights when they return to Washington after voters have their say in November.
First up will be another shutdown debate: this time with potentially more fraught politics and a new holiday deadline of Dec. 20.
And then soon after that looms another debt ceiling shutdown that could be front and center on Washington’s plate in 2025, with the federal debt limit set to be reinstated to open the year followed by an “X date” for actual default likely to follow a few months later.
And that’s before a giant tax debate consumes Washington — likely in the second half of 2025 — before an array of the tax cuts implemented in 2017 expire at the end of next year.
The tenor of these debates to come will be shaped by the election results in November, with some post-election scenarios potentially increasing the chances of dramatic shows of brinkmanship.
And that’s as the business community and credit rating agencies watch warily after Washington’s repeated flirting in recent years with economically damaging shutdowns or potentially catastrophic debt defaults.
For now, Congress has acted to punt the issue and get back to the campaign trail. The House first passed the bill Wednesday by a tally of 341-82. House Speaker Mike Johnson saw 82 members of his own party, all the no votes, oppose his compromise with Democrats. The bill then quickly moved through the Senate in a tally of 78-18.
“This bipartisanship is a good outcome for America,” Senate Majority Leader Chuck Schumer offered as the deal reached a conclusion “and I hope it sets the tone for more constructive, bipartisan work when we return later in the fall.”
The first deadline: Dec. 20
This week’s deal passed by wide margins but included concessions that could make dealmaking harder in the coming months,
What’s not in this week’s plan are ideas that Speaker Johnson, GOP nominee Donald Trump, and many Republicans had insisted for weeks were must-haves: a GOP-backed election security proposal called the SAVE act.
Trump has previously even said that Republicans “should not agree to a Continuing Resolution in any way, shape, or form” without the now-discarded bill.
The new December deadline also comes just before a changeover in Congress to begin 2025.
That could mean Johnson — potentially in the middle of a contest to again be Speaker — could have much more complicated calculations about how to respond to another round of negotiations. Same goes for Democratic House Minority Leader Hakeem Jeffries if he is set to ascend.
That’s not to mention a succession race underway in the Senate, with Kentucky’s Mitch McConnell set to step down as the GOP leader. Sens. John Thune, John Cornyn and Rick Scott are vying to replace him.
Historically, multiple shutdowns have occurred around these December deadlines with two longest shutdowns in US history beginning in mid-to late December.
A debt ceiling fight soon behind
But even if Congress averts a shutdown, a debt-ceiling deadline will follow shortly behind.
The federal debt limit is set to be reinstated on January 2, 2025 per the deal that ended the last standoff between President Joe Biden and then-Speaker Kevin McCarthy.
What will follow in 2025 once the borrowing limit is back in place are what are called “extraordinary measures” by the Treasury Secretary to essentially move money around to cover the government’s bills.
But that can’t last forever. The Bipartisan Policy Center is projecting that the so-called X Date—when the maneuvers run out and a government default is possible — is likely to be delayed until after the influx of funds from next year’s tax season but will nevertheless be coming later in 2025.
It’s all likely to be watched nervously by the business community and rating agencies that have again and again cited government dysfunction as a reason for their mixed view of US creditworthiness.
Fitch downgraded the US government’s top credit rating from AAA to AA+ in 2023. Moody’s followed later that year. It stopped short of a downgrade but changed the outlook on the US government’s rating to “negative” from “stable.”
Fitch, Moody’s, and S&P Global Ratings — which downgraded the US credit rating back in 2011 — have all cited protracted government standoffs as a central reason for their changes and why they are constantly monitoring for potential further adjustments.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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