As lawmakers strive to avert a government shutdown scheduled for March 1, an arguably more critical deadline emerges on April 30, where ultimately both defense and non-defense program might get cuts of 1% due to complications in passing short-term resolutions.
The agreement reached last year between President Joe Biden and then-Speaker Kevin McCarthy stipulates that without a consensus on full-year spending bills, these cuts would take effect, potentially posing significant consequences.
Negotiations between the White House and Congressional leaders, including House Speaker Mike Johnson, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, and House Minority Leader Hakeem Jeffries, have followed a familiar pattern of last-minute brinksmanship.
While analysts, including Gregory Daco, Chief Economist at EY-Parthenon, anticipate the likelihood of another short-term continuing resolution to extend funding, the looming April 30 deadline adds complexity to the situation.
With a history of delays in resolving previous shutdown threats, the current impasse raises concerns, especially as the credit rating agencies attribute dysfunction to the diminishing views of US creditworthiness.
Lawmakers are set to meet with President Biden on Tuesday, and while a short-term resolution may be imminent, the unresolved policy disputes, including conservative House Republicans’ wishlist and debates over federal assistance programs, remain significant hurdles.
As Speaker Johnson navigates internal challenges from conservative factions, the possibility of a partial government shutdown due to policy disputes is acknowledged. However, the April 30 deadline is considered the larger issue, as automatic spending cuts could be triggered, impacting both defense and non-defense sectors.
Stifel’s chief Washington policy strategist, Brian Gardner, suggests that while the chances of the spring cuts taking effect are slightly less than 50/50, the defense sector might feel a more acute impact.
The upcoming White House meeting on Tuesday will likely spotlight Speaker Johnson, who seeks to manage internal dynamics while avoiding a government shutdown. Attention will also be on Representative Chip Roy, who indicates a willingness to enter a shutdown and sees the potential for automatic cuts as a starting point for change, showcasing the broader challenges faced in navigating these fiscal deadlines.
