Congress faces budget deadline, Israel funding and Fed decides

L . Thomas Block
Key Takeaways
  • New House Speaker Johnson is facing his first big test as the November 17 budget deadline approaches.
  • Meanwhile the decision of whether to tie aid to Israel to cuts in IRS funding, or to bundle it with continued assistance for Ukraine, continues to be an issue of contention.
  • Fed Chair Jerome Powell got as close as he could to explicitly taking another rate hike off the table at this week's FOMC meeting.

The November 17 deadline for Congress to act and pass government funding bills to avoid a government shutdown is quickly approaching.  The central issue is how newly elected Speaker Johnson threads the needle to get a bill passed by the almost evenly divided House.  He has told colleagues that he’d like to pass a short-term CR that would run until January 15.

With only a four-seat majority, he needs to find a deal that will either have no Republican opposition or pass with a bipartisan majority.  There are a handful of Republicans who have a philosophical problem voting for any CR. To develop a Republican-oriented CR, there is a new idea floating around DC which is being labeled a “laddered” CR.  Under this idea, not all government agencies would see their budgets expire on the same date, allowing the Congress to deal with the huge federal spending bills individually.  This is an untested idea and not only does no one know exactly how it would work, a big question is whether the Senate and White House would accept the concept.

Tied to Congress and spending is the President’s request for new money for both Israel and Ukraine.  This past week the House passed an Israeli money bill, but it was tied to a provision that links the $14.5B expenditure to a like size cut in the IRS, a plan both the Democratic Senate and White House have opposed.

The Senate is likely to pass an Israel/Ukraine bill and may add provisions to help at the US Southern border to solidify Republican support.

This past week the Fed at the meeting of the Federal Open Markets Committee (FOMC) agreed to keep rates steady. The decision was unanimous by the Committee members.

During the post meeting press conference Chair Powell in response to a reporter’s question said that the staff did not put the chance of a recession back into their outlook. While a rate hike wasn’t taken completely off the table barring some disastrous news materializing, I think it’s about as close to being off the table as the Chair can take it. 

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L . Thomas Block
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