With Deadline Looming, Congress Tries to Avert Government Shutdown | Charles Schwab

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With Deadline Looming, Congress Tries to Avert Government Shutdown

December 01, 2016

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

While most of the focus of the political world has been on President-elect Donald Trump and his selections for key positions in his administration, Congress is back in Washington with a critical deadline looming next week—one that could affect the markets.

The current agreement to fund government operations, reached in September, expires on December 9, 2016. Without an extension of funding, a government shutdown would take place on December 10.

We think the odds of a shutdown are very low, but that doesn’t mean it will be a smooth path to consensus over the next week as Congress scrambles to meet the deadline. And the closer Congress gets to that deadline, the more unsettled the markets could become.

The temporary measure is necessary because Congress has only passed one of the 12 appropriations bills that provide funding for each federal agency and program. Lawmakers and staff on Capitol Hill have been working in recent months to forge agreements on the outstanding appropriations bills in the hope of passing at least some of them during this post-election, “lame duck” session of Congress. But that idea has apparently been shelved.

Instead, Republican leaders on Capitol Hill are planning to push forward this week with a straightforward bill, known as a “continuing resolution,” that would simply continue the funding for all government operations at current levels through March 31, 2017.

But some Republicans are reportedly balking at that March 31 date, preferring instead a deal that would run until the end of May. Proponents of this strategy argue that the Senate is likely to be still debating and confirming Trump’s Cabinet nominees in March, and that trying to reach a budget agreement in the midst of that process will be difficult.

Moreover, they say, the new administration will not benefit from having a spending showdown so soon after taking office.

As of November 30, it was still unclear which approach congressional leaders would take.

Once policymakers agree on a date for the extension of government funding, there is still the matter of passing it. Because the funding package is the last “must-pass” piece of legislation likely to move in the 114th Congress, lawmakers will be eager to load it down with miscellaneous policy provisions that probably would not be approved on their own.

Members of Congress are also eyeing the government funding bill as a vehicle to which they can attach special provisions, such as funding for the water crisis in Flint, Mich., and funding to combat the Zika virus.

These discussions are likely to continue right through next week. If Congress gets too close to the December 9 deadline, it can pass a stopgap measure to fund government operations for a few days while negotiations continue—something that it has done several times in recent years.

Once the measure clears both chambers of Congress and is signed by President Barack Obama, that will bring the curtain down on the current Congress and they will break for the holidays. The new Congress will convene on January 3, 2017, and is scheduled to count the votes in the Electoral College on January 6. 

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