On Thursday the House and Senate passed a Continuing Resolution (CR) and sent it to the White House pushing the government shutdown deadline from October 1, until December 3. The hope is that in the next two months Congress can agree on spending for the various departments of government and pass regular appropriation bills. Under a CR spending is frozen at current year levels and from defense to health research there is general agreement that funding priorities need to be adjusted for the current year.
For financial markets, probably the biggest news was the official notification to Congress by Treasury Secretary Yellen that October 18 is the drop dead date for the government needing to borrow in order to have the cash to pay bills. As of today the Congress has no game plan to raise or suspend the ceiling. Senate Republican Leader McConnell has said Republicans will not provide any votes to deal with the debt ceiling; but when Democratic Leader Schumer tried to pass a suspension of the ceiling with just Democratic votes McConnell and his Republican colleagues raised the bar by filibustering the bill. Under Senate rules what this means is that not only do the Democrats have to supply the 51 votes to pass a bill; but they need 10 Republicans to stop the filibuster. With Republicans unwilling to invoke cloture and stop the filibuster even a Democrats only debt ceiling resolution seems out of reach.
Republican Leader McConnell has stated that the Democrats must use the complicated reconciliation process to raise the ceiling. Democrats don’t believe that is the right vehicle as it will require a new Budget Resolution which is a long cumbersome process.
This leaves the US Government with a cash flow crisis and no legislative roadmap to solve the problem. Obviously we at FSInsight will be following this closely in the coming days.
Finally, Congressional Democrats in the House are fighting amongst themselves about the timing of votes on both the Senate passed $1Trillion infrastructure bill and the President’s Build Back Better (BBB) $3.5T program to be passed under Budget Reconciliation.
The bipartisan infrastructure bill has passed the Senate with 19 Republicans supporting it and if passed by the House will go directly to the White House to be signed by the President. However, the progressive Democrats are focused on the $3.5T BBB reconciliation bill and are concerned that if they help pass the infrastructure bill moderates will back away from the reconciliation package. While the Speaker had promised moderate Democrats a vote on the infrastructure bill, on Monday progressives declared their intention to vote NO, so no vote occurred. Frantic meetings have occurred for the past few days but at 3pm on Friday no deal appears in sight.
In my view, the Democrats need a win, and a massive infrastructure bill seems like a good win. This saga, and the search for a debt ceiling resolution will continue into next week.
