Good morning, friends.
The federal government is headed toward a shutdown with current appropriations set to lapse at 12:01 AM tomorrow, Wednesday, October 1. Our team has experienced several government shutdowns from various positions within the federal government. Below, we share our perspective on the current situation and how this crisis is likely to unfold.
The last government shutdown was also the longest in our nation’s history: 35 days, from December 22, 2018, to January 25, 2019. That shutdown fight was over funding for a US-Mexico border wall, and when it was resolved, almost all federal employees were retained and received back pay. This shutdown will be different in many ways.
To begin, a government shutdown occurs when the federal appropriations (effectively, Congress’ instructions for federal funding) end. Without current appropriations, the Office of Management and Budget (OMB) – an office within the White House that reports to the President of the United States – determines which federal entities are “essential,” and therefore which federal employees must continue to work without pay until the shutdown concludes. Both essential and nonessential employees receive back pay once the shutdown is resolved.
In the past, the OMB has deemed entities such as air traffic control, law enforcement, and Social Security offices as essential, while others, including many federal entities, passport offices, and loan offices, have been deemed non-essential. Members of Congress decide which of their congressional staffers are essential, official Capitol tours are closed, and the Capitol Police go without paychecks. After several missed paychecks, even essential federal employees could stop reporting to work, which can cause significant – even dangerous – issues across the country. Paychecks for members of the military will only be affected if the government shutdown persists beyond October 15.
The current situation has arisen as Democrats, led by Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY-8), are primarily demanding permanent extensions of expiring Affordable Care Act subsidies in exchange for voting with Republicans on a continuing resolution (CR) that would extend current appropriations through November 21, 2025. Republicans, led by President Donald J. Trump, House Speaker Mike Johnson (R-4-LA), and Senate Majority Leader John Thune (R-SD), insist that Congress has time to debate the healthcare subsidy policy because those subsidies do not expire until the end of 2025. In short, Democrats argue the healthcare subsidies are too important to wait to renew, while Republicans argue this short-term CR should not be tied to a permanent policy with significant long-term spending implications.
To add pressure on Democrats, Trump’s OMB Director, Russ Vought, issued a memo instructing federal agencies to use this shutdown as an opportunity to carry out mass terminations of federal employees with roles that are “not consistent with the President’s priorities.” This is a signal by the Trump Administration that this shutdown could have much larger implications than previous shutdowns. We expect OMB, and by extension, President Trump, to utilize the extraordinary power granted to them during a shutdown to direct the operations of the federal government in unprecedented ways. This fear is why Leader Schumer broke with his party in March to support a clean CR and avoid a shutdown – a decision that severely damaged his reputation within his party.
A clean CR passed the House last week with a majority vote, but it failed in the Senate, where it required a 60-vote majority to pass. At the very least, Senate Republicans need all their members and seven Democrats to vote for the CR. Eventually, a deal will be struck. But in the meantime, it would be prudent to expect National Parks to be shuttered, many federal employees to be fired, and political rhetoric to be dialed even higher.
As always, we will keep you updated as this situation unfolds and stand ready to answer questions related to how this shutdown could affect your organization.
Sincerely,
The Bridge Team