Another US shutdown is looming

It's getting tight again...

Congress must agree on a new Continuing Resolution (CR) to keep the US government funded this week. Otherwise, government agencies risk closure at midnight on Friday (a so-called shutdown, see box below).

The Republican speaker of the House of Representatives, Mike Johnson, wants to put a six-month stopgap funding measure to the vote today. This essentially continues current spending, but wants to cut funding for the IRS by $20 billion and increase spending on defense and immigration control slightly. Johnson has apparently been able to win the approval of the Freedom Caucus, the hard line wing of Republicans in the House, which increases his chances.

... and a majority in Congress is difficult to achieve

The Republicans only have a narrow majority of 218 to 214 votes in the House of Representatives (3 of the 435 seats are currently vacant). If the Democrats are united in their opposition to the package – and they are likely not happy about cuts to the IRS – Johnson can hardly afford any defections from his own ranks.

However, the necessary approval in the Senate is probably an even bigger problem. This is because a majority of 60 of the 100 votes is required there. The Republicans have 53 senators – and at least one has already promised a no vote. So far, only one Democrat has signaled his approval. It is unclear whether enough other Democratic senators will vote in favor to help the bill cross the 60-vote threshold.

Bipartisan cooperation is difficult because the Democrats are strongly opposed to the radical program of cuts to federal agencies implemented by the Trump administration. For example, the USAid development agency has been closed, Trump also wants to abolish the Department of Education and lay off tens of thousands of public sector workers. The betting markets therefore price in a 53% probability of a shutdown in 2025.

However, if the Democrats refuse to give their consent, they risk being blamed by the Republicans for a shutdown. In the past, the party that was publicly perceived as causing a shutdown was politically damaged. However, it is questionable whether the Democrats will buckle in the face of the administration's aggressive behavior. Should they insist on concessions from the Republicans, for example on the budget cut for the IRS, the Republicans' approval for a CR could in turn falter.

For full text see attached PDF-Version.