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With a Federal Shutdown Looming, Ten Things You Should Know

With a Federal Shutdown Looming, Ten Things You Should Know

As the two-week reprieve on a federal shutdown rapidly ticks away, congressional leaders are faced with reaching agreement on another stopgap spending measure in order to again avert a government shutdown on March 18.

Avoiding the March 4 shutdown deadline, the House and Senate shaved $4 billion in federal outlays during the two-week period. There is very little agreement yet on the level of spending cuts proposed for the second stopgap plan.

President Obama continues to urge congressional leaders to "find common ground" and come up with a lasting spending plan that puts to rest the continuing risk of a federal shutdown. The White House fears a series of temporary spending measures would create economic uncertainty undermining recovery efforts.

The problem with finding "common ground" is that Democrats, Republicans and now, Tea Party congressional members have starkly differing views on how and where to cut spending to reduce the federal deficit.

The ten things that we at Turner GPA are telling our clients to bear in mind as they watch the federal budget drama continue to unfold:

  • 1- According to our close contacts on the Hill, a second two-week Continuing Resolution (CR) should be passed-at least by the House--by Friday to allow time for it to be enacted before the current CR expires. The Senate plans on passing its version of a two--week CR this week as well, but it could become mired down and miss the informal Friday deadline.
  • 2- There is very little agreement yet on the level of spending cuts in this second short CR, which means we could face another government shutdown preparation drill next week.
  • 3- If there is a shutdown expect national parks to close, disruption on government home loan processing, unemployment insurance, social security payments, passports, export financing and potentially, tax refunds and Social Security payments. Vital security services like air-traffic control, border patrol, federal prisons, the Department of Defense, and disaster assistance would continue.
  • 4- Hill staff has confirmed that the Congressional Budget Resolution (BR) is being drafted now in both the House and Senate although its release will be delayed as Congress deals with the second two-week CR and negotiates a six-month CR for the remainder of FY 2011.
  • 5- Speaker John Boehner and House Budget Chairman Paul Ryan plan on introducing the House FY 2012 BR, which is expected to contain major entitlement cuts, as soon as the first week of April.
  • 6- If those entitlement cuts aren't aggressive enough and appear to be too moderate look for the 87 Republican freshmen to rebel. Even if a revolt doesn't occur, there may not be enough votes to pass a moderate House BR. House Democrats plan to vote against entitlement cuts, especially those targeting Social Security.
  • 7- On the Senate side there will be less drama where Senate Budget Committee Chairman Kent Conrad will continue to use the deficit reduction commission recommendations as a blueprint for getting the federal budget under control.
  • 8- A Budget Agreement, once it is adopted by both chambers, does not become law but instead limits what both authorizing and appropriations committees can include in legislation for FY 2012. The key component of this agreement is the reconciliation instructions, which gives congressional committees 2 to 3 months to develop and implement legislation to authorize spending cuts and revenue measures. That 2 to 3 month period presents an opportunity for interested parties to influence legislation and particularly important in this political climate; preserve funding.
  • 9- However, given that a Democratic Congress failed to enact a single appropriations bill last year, chances are not good that this year's divided Congress¬†will pass many, if any spending bills.
  • 10- Last year, Congress also could not pass an omnibus spending bill. That could happen again this year. As a result, we could be in for "government by CR" for the foreseeable future.