The American Congress seems unable to find an agreement on the 2024 fiscal budget, and could cause a government shutdown by the end of the week.
The House Republicans are unhappy about a deal they agreed upon months ago… and now want to shut down the entire United States government. This is the short version of the latest domestic political strife in the United States, whose outcome appears yet uncertain as September drags on.
On October 1st, just five days from now, the new US fiscal year will officially start. With a new fiscal year comes a new fiscal budget, which is usually agreed upon months before its actual start.
This year was no different, with the debt ceiling crisis almost provoking a US default in June. Days before the default’s deadline, US President Joe Biden and Congress reached an agreement to suspend the debt ceiling until 2025.
In the United States, Congress has to approve every fiscal law. After the 2022 Midterm elections, Biden lost to the Republican party his hold over the House, though retaining a majority in the Senate. Since then, House Republican speaker Kevin McCarthy opposed every action by Biden, forcing him to compromise.
The agreement struck in June conceded to Biden the suspension of the debt ceiling until 2025 but won Kevin McCarthy the strongly requested spending cuts for the 2024 budget.
Last week, when Congress reconvened after the Summer break, the radical wing of the Republican party refused to approve the 2024 budget McCarthy agreed upon. They wanted even more cuts.
A government shutdown
If Congress fails to approve the 2024 budget by October 1st, the US government will temporarily halt its daily functions. Million of Americans working for the government will suddenly find themselves without pay for an indefinite amount of time.
Urgent functions like healthcare and air traffic control will continue, but non-essential government employees will take a mandatory leave from work.
According to Goldman Sachs, a government shutdown causes a 0.2% GDP drop for every week it remains active. This could fuel recession fears as the country battles with high interest rates.
Republicans have drafted a new budget bill including measures on abortion, contraception, and other issues that make it unlikely to pass in the Democratic-held Senate.
The main issue, however, is the renewed support for Ukraine. Hard-core Republicans, including presidential candidate Donald Trump, call for an immediate halt to new defense spending against the Russian invasion of Ukraine.
On his social media, Donald Trump endorsed an immediate government shutdown.
McCarthy is now trying to pass a few budget bills that could moderate the effects of a shutdown. If the government really pauses operations, however, it will have ripple effects anyway. And the Republican party will be responsible.
