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T’S EASY TO HATE CONGRESS during the holidays, and here we go again. Lawmakers will return to Washington on Nov. 29 without a clear plan to deal with spending issues — raising the threat that “must pass” legislation could languish well into next year.
A STOP-GAP FUNDING BILL, called a Continuing Resolution (CR), was passed when the previous fiscal year ended on Sept. 30. This CR will expire on Dec. 16, probably requiring another CR that will last until Christmas Eve — or, perhaps, well into 2023. Then things will get interesting.
A NASTY FIGHT BETWEEN REPUBLICANS is erupting, with conservatives pushing for a CR that would last well into next year, with spending frozen at the previous year’s level, amid calls for deep cuts in outlays that could threaten prompt passage of more aid to Ukraine and a new defense bill. Both could stall well into 2023.
THE MAIN COMBATTANTS in this deepening feud are the Republican establishment, let by Mitch McConnell, and hard-line fiscal conservatives, led by Rick Scott. The latter group would stall on a spending bill until Congress passes their priorities, such as the abolition of funding for 87,000 more IRS agents and more spending to protect the U.S. border with Mexico.
ALL OF THIS WILL BE A PRELUDE to the main attraction — a fierce fight by late spring on raising the federal debt ceiling. A government shut-down by summer is a real possibility, and GOP deficit hawks already are talking about a federal debt default by late summer, although that reckless threat usually dissipates at the last minute.
KICK THE CAN DOWN THE ROAD: The first major battle of this debt saga will come in late December, when lawmakers — eager to go home for the holidays — often take the easiest path and punt on a final spending bill until the next year.
IF CONGRESS TAKES THAT PATH in late December, it would give some leverage in early 2023 to Rep. Kevin McCarthy, who desperately wants to please hard-liners who have not committed to voting for him to become the next House Speaker.
THIS BITTER — AND CONFUSING — FIGHT OVER SPENDING will generate headlines about a U.S. debt default, which has never occurred. We might come close next year, so this is an issue the financial markets will have to monitor carefully.
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