It occurred to me that over the past two months we just watched another possession of the political football game which seems to have ended in another punt with yet another short-term funding bill. Congress is taking a timeout for now to catch their breath but will be back to the gridiron or better, gridlock, with sights on the next funding deadline of January 30th (ironically, a week before the Super Bowl).
Timeline of the Shutdown
Prior to the shutdown, according to NPR, the Democratic base had been urging its leaders to show more fight. Senate Democratic Leader Chuck Schumer caught blowback in March for doing an about-face and going along with Republicans to keep the government open despite what the left saw as an odious spending bill. The article continues, when the latest funding fight came up, Schumer this time showed a united front with House Democratic leader Hakeem Jeffries. Arm in arm, they refused to go along with continuing to fund the government, and made the key issue extending health care subsidies, which, if not extended, would mean tens of millions of Americans would see their health care costs increased.
On October 1, the Federal government shut down, immediately impacting national parks, veteran affairs, and social security. As the shutdown continued, more government agencies were affected, and federal employees were furloughed. By day 15 of the shutdown, federal workers who receive pay through checks, as well as active-duty military, missed payments for October work. As depicted in the chart, by October 31, 36% of U.S. adults said they were personally affected by the shutdown in some capacity, highlighting the growing discontent within the nation. Further, 48% of U.S. of Democratic voters said they were affected compared to 25% of U.S. Republicans, shown below in Statista’s graph from YouGov.
By November 4th, the Federal shutdown became the longest in recent history, as shown in the chart below from NPR.
The current federal shutdown is the longest in recent history
The shutdown finally ended on November 12, without the health care extensions Democrats were fighting for. Eight moderate senators crossed the aisle and indicated Sunday night that they had struck a deal with Senate Republicans to reopen the government.
The reason they didn’t hold out longer, this group said, was because it was obvious President Trump and congressional Republicans weren’t going to negotiate, and too many people were suffering. The Trump administration — correctly — gambled that enough Democrats would not be able to stomach the amount of pain the administration was willing to inflict on the 42 million recipients of the Supplemental Nutrition Assistance Program, or SNAP, and more than three million federal workers.
Reopening of the Government
This week, the USA TODAY provided good insight into how the ripple effects of the longest ever government shutdown are slowly alleviating after the federal funding impasse officially ended. The article notes a few areas where there have been pain points and friction and how some progress is being made. Per the article, the Federal Aviation Administration said it lifted restrictions on commercial flights at 40 major U.S. airports around the country as of November 17. The limits had been imposed during the shutdown because of safety concerns as air traffic controllers stopped showing up to work without pay, prompting thousands of flight cancelations.
In the November 16 news release, the FAA said air traffic controller staffing levels have “continued to snap back into place” since the end of the shutdown. USA TODAY continued, Some 750,000 federal workers were furloughed during the shutdown, while others were considered essential and required to work without pay. All were ordered to return to their jobs on November 13 after the government reopened.
While most federal employees were not paid during the lapse in funding, some, including military members and homeland security officers, received paychecks under special conditions. All workers affected by the shutdown are entitled to the backpay they missed during the period.
A senior Trump administration official confirmed to USA TODAY on November 13 that departments were aiming to send out checks covering back pay between November15 to 19, depending on the agency. Because agencies have different payroll providers and payment processes, timing could vary, the official said.
What happens next
As stated before, Federal agencies began to return to normal operations on Thursday, November 13. While this development was welcomed news, the bill that was signed by President Trump only funds the government until January 30. Congress once again “punted” to this date after the New Year and will need to work together to develop a more comprehensive plan to continue to fund the government or we may be revisiting a similar scenario once again. After reviewing the bill, only three of the dozens of bills lawmakers need to finish each year to keep the program running were agreed to long term – veterans programs, food aid, assistance for farmers. As Politico points out, together, they represent only about 10% of the roughly $1.8 trillion Congress doles out each year to federal agencies. Under the deal, everything else is funded on a temporary basis through January 30 at levels first set by Congress in March 2024, when Joe Biden was president. Major decisions are left about most of the discretionary dollars.
House Majority Leader Steve Scalise acknowledged earlier this month, “We’ve got to just find a resolution to get the lights back on,” Scalise said. “But the real negotiation is going to be: Can we get an agreement on how to properly fund the government with individual appropriations bills, packages of appropriations bills?”
If lawmakers don’t figure it all out by the new January deadline, the risks are that another partial shutdown or running most of the federal government on what are essentially two-year-old budgets will be looming. Some Democrats are already hinting they are willing to shut down the government again without a deal on Affordable Care Act insurance subsidies that expire at the end of this year.
While the political football game will continue to determine how to best fund the government programs for the long term, recent history has suggested that both sides will somehow figure it out or at least punt the ball again and take a breather, reestablish the line of scrimmage in the attempt to score political points for the next term. However, there are real ramifications to a government shutdown. The U.S. budget office calculates that it costs the U.S. economy $7 billion dollars per month that won’t be recovered. At the very least, if we do in fact go through another short-term shutdown, we’ll have the Super Bowl to look forward to. Let’s hope the Bills can finally make it there this year!
This material is provided for informational and educational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed reflect the personal opinions of the author as of the date written and are subject to change at any time without notice. The information herein is derived from publicly available sources believed to be reliable, but no representation or warranty is made concerning the accuracy, completeness, or reliability of the information presented. Any third-party data, sources, or citations are provided for reference and have not been independently verified. References to NPR, USA TODAY, Statista, Politico, and other media sources are illustrative and do not constitute endorsements. This commentary discusses U.S. government activity, legislation, and political events solely for general informational context. It is not intended to express or imply any political recommendation, advocacy, or prediction of legislative outcomes. Discussions of public policy and government spending are provided to help illustrate macroeconomic themes and should not be interpreted as forecasts, guarantees, or recommendations to take any specific investment action. Past events and historical data are not indicative of future results. Forward-looking statements, including expectations about government actions, economic impacts, or market outcomes, involve assumptions, uncertainties, and risks. Actual results may differ materially. Investment decisions should be made based on an individual’s objectives, financial situation, time horizon, and risk tolerance. Always consult a qualified financial professional before making any investment or planning decisions. References to sports analogies (including mentions of the Buffalo Bills) are illustrative only and should not be interpreted as investment guidance or recommendations. Any mention of specific securities, sectors, or markets, if included, is for informational purposes only and is not a recommendation to buy, sell, or hold any security or investment strategy. Diversification and asset allocation do not ensure a profit or protect against loss. All investing involves risk, including the possible loss of principal. Howe & Rusling, Inc. (“H&R”) is an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.
