Congress has avoided a partial government shutdown with a 45-day funding bridge, but also set the stage for more battles this fall.
“The surprising move over the weekend that averted a government shutdown should be a positive for the markets as it alleviates fears of dysfunction in Washington — at least temporarily,” said Stifel’s chief Washington policy strategist, Brian Gardner, in a note.
“It is likely, however, that there will be a move to remove Speaker McCarthy from his position and the budget standoff could be reengaged in 45 days so the era of good feelings might be short lived,” Gardner added. That’s a reference to a “motion to vacate” that Rep. Matt Gaetz of Florida has promised to file this week against House Speaker Kevin McCarthy, a fellow Republican, after McCarthy relied on the support of House Democrats to pass the short-term measure that averted a shutdown.
The main U.S. stock gauges
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were putting in a mixed performance on Monday.
Here’s a look at what’s ahead as U.S. lawmakers face a new deadline of Nov. 17 for reaching agreements on government funding.
Gaetz-McCarthy fight may not change the spending picture
Gaetz’s motion to remove McCarthy from the post of House speaker needs the support of a majority of the chamber in order to work, and the Florida congressman has said himself that he expects Democrats “are going to bail out Kevin McCarthy,” meaning support him enough to offset the opposition from Gaetz and some other Republicans.
The bottom line is that Washington’s spending might not change that much even if Gaetz manages to oust McCarthy, according to Chris Krueger, managing director at TD Cowen’s Washington Research Group.
“Democratic votes will be required to topple McCarthy, but also to keep him in his seat. How this all plays out will drive clicks, but the real story is the policy outcome on spending — and that doesn’t move much regardless,” Krueger said in a note.
That’s “mainly because the White House and Senate are in agreement along with House Democrats and enough House Republicans,” he added.
Now see: U.S. government shutdown would be ‘credit negative,’ Moody’s warns
McCarthy made a deal in May with President Joe Biden on spending targets as part of their negotiations to raise the debt ceiling, but some hardline House Republicans like Gaetz have blasted that agreement and aimed for lower levels of outlays.
Brace for another short-term measure
Once the current 45-day funding bridge runs out, it’s possible Congress will end up having to put together another short-term measure that prevents a shutdown.
The past weekend’s legislation “provides Congress additional time to pass individual spending bills,” but given the challenges in the last few months “odds are low that Congress will be able to finish work on these bills,” said Stifel’s Gardner.
There are significant disagreements between the House and Senate on each appropriations, or spending, bill, so Congress probably will have to pass another continuing resolution in November, he said.
Potential for deals on border and Ukraine
Another analyst expects Washington will be able to pass the individual appropriations bills and even make a deal on two key issues — money for security at the U.S.-Mexico border and further spending on Ukraine as that country continues to resist Russia’s invasion.
“There’s no stomach on Capitol Hill for more brinksmanship,” said Greg Valliere, chief U.S. policy strategist at AGF Investments. He thinks it’s unlikely that there will be threats of a government shutdown just before Thanksgiving, which falls on Nov. 23 this year, and instead expects more dealmaking.
“A deal will include approval of individual appropriations bills, more funding for U.S. border security, and at least $10 billion for Ukraine,” Valliere said.
Related: Biden calls on Republicans to ‘keep their word about support for Ukraine
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