Yahoo Finance Kevin McCarthy may be running out of options to avert a government shutdown
House Speaker Kevin McCarthy has repeatedly tried to find an off-ramp to avoid a looming government shutdown. But he has been stymied again and again by the most conservative members of his caucus.
"I am frustrated with some people in the conference," he said recently.
The Speaker experienced another setback Tuesday as a bill to keep the government open for just one month badly stalled even among members of McCarthy's own party. McCarthy had championed the idea to propose spending cuts of more than 8% at many agencies and controversial border provisions in exchange for the temporary solution.
The compromise cleared one hurdle in the House's Rules Committee Monday night but was stopped in its tracks Tuesday following a new wave of statements that cast serious doubt on whether McCarthy will ever be able to unite his own members behind the proposal.
Many conservatives said it doesn’t go far enough.
Rep. Anna Paulina Luna (R-Fla.) estimated overnight that over 17 House Republicans currently oppose the deal. “MISTAKE” she wrote, calling for additional policy provisions that would also be surely rejected by the Senate. Another tally, from Rep. Andy Ogles (R-Tenn.), put the number at 18.
Even some of McCarthy’s erstwhile allies have announced their opposition. “I’m a NO,” wrote Rep. Marjorie Taylor Greene. The influential Georgia congresswoman had been allied with McCarthy in previous fights, such as his quest for the speakership.
With Democrats certain to be unanimous in their opposition, House GOP leadership can only afford to lose four votes before the gambit goes down in defeat.
On Tuesday afternoon, a procedural vote on the deal was abruptly delayed just hours before it was set to take place as it became clear that McCarthy didn't have the votes for now to pass the deal.
The speaker now faces a key test of whether he can change enough minds to pass the bill as is, whether it will need to be amended to further appease the right wing, or whether the idea is simply dead.
The economic costs
Many in the financial world are beginning to plan for a government shutdown that some lawmakers on both sides of the aisle are calling inevitable.
"It's not inevitable, a shutdown is a choice," Neil Bradley, US Chamber of Commerce executive vice president, said in a recent Yahoo Finance Live interview.
“This is becoming way too common of an occurrence and it's going to have lots of ripple effects through the economy,” he added.
The growing question appears to be not if there is a shutdown, but how long it plays out. A protracted government shutdown that stretches into the winter could begin to extract noticeable economic effects not seen in other showdowns that were either shorter or didn’t impact the entire government.
Economists are struggling to quantify the economic costs of a shutdown — which could be one of the costliest ever — especially as drama unfolds amid other events that could offer economic headwinds, from the ongoing UAW strike to the resumption of student loan payments.
Many businesses rely on the government for services and could be negatively impacted if the standoff drags out, added Bradley of the US Chamber of Commerce.
“When you think about people who need visas and permits and government certifications to operate, those are the ones who are immediately impacted and and the longer a shutdown goes on, the more time is lost and the more negative consequences for all of those businesses,” he said.
Treasury Secretary Janet Yellen added her voice Monday on the potential costs of a shutdown. She told Reuters that a shutdown would be "an unnecessary risk to the economy and to the normal functioning of government" pushing for bipartisan compromise but added that she didn’t expect the risk to derail what she says is a fundamentally strong economy.
'I am frustrated'
McCarthy faced similar troubles with his caucus last week when he acceded to wishes for an impeachment inquiry against President Joe Biden largely to mollify his most conservative members.
But it was immediately evident that the move had done little to lessen any of the pressure for a shutdown.
McCarthy has told his members repeatedly in recent days that a shutdown would only benefit President Biden but appears to have failed so far to move his most rigid members. Some of his opponents are now openly calling for McCarthy’s ouster.
The back and forth has also gotten notably personal with figures like Rep. Victoria Spartz (R-Ind.) calling McCarthy a “weak speaker” and McCarthy himself using expletives during closed door meetings.
"I showed frustration in there," McCarthy acknowledged afterwards.
What makes things more complex for a budget fight is it’s happening in parallel to the questions about McCarthy’s job security.
A logical way to solve the budget problem would be for House Republicans to propose a more moderate option and seek votes from Democrats. But any move in that direction would almost surely spur efforts for McCarthy’s ouster.
Rep. Matt Gaetz (R-Fla.) has threatened to call for a vote to replace McCarthy every day Congress is in session, noting that the rules allow for a single member to call forth a "motion to vacate."
McCarthy for his part has long chided observers for underestimating him — often dredging up past predictions that he couldn’t be elected speaker or get a debt ceiling deal passed — but his right flank has united in a new way in recent days saying that past compromises are lessons they don’t want to repeat.
"It’s gut check time for everyone," Gaetz recently wrote.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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