Government Shutdown Averted. What’s Next in Spending Fight?

Government Shutdown Averted. What's Next in Spending Fight?

Congress has averted a government shutdown—for now. 

The continuing resolution passed Saturday keeps government agencies funded at current levels until Nov. 17. The bill passed 335-91 in the House and 88-9 in the Senate.

But it’s a short-term fix, and lawmakers remain on a tight deadline to finish passing 12 annual appropriations bills. Republicans continue to demand federal spending cuts and money to secure America’s southern border, and Democrats are demanding more aid for Ukraine. 

“I think what’s likely here is, you’re going to get a little bit of both, not enough to make either side happy,” budget expert Richard Stern says. 

Stern, director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation, joins “The Daily Signal Podcast” to explain what to expect in Congress as spending fights continue over the next six weeks, and how a possible change in House leadership might affect negotiations. (The Daily Signal is the news outlet of The Heritage Foundation.)

Listen to the podcast below or read the lightly edited transcript:

Virginia Allen: We are joined today by The Heritage Foundation’s Richard Stern. Richard, thanks for being back in studio with us today.

Richard Stern: Thanks again. Always a pleasure.

Allen: Well, we went into the weekend thinking that the government was likely about to shut down, in the midst of this spending fight. We knew that Congress had very little time to reach an agreement or settle on a continuing resolution. But Congress did succeed in passing this short-term funding bill to keep the government funded until Nov. 17. What exactly changed over the weekend? How was a government shutdown averted?

Stern: It’s a great question. A little bit of this is kind of the magic of how Congress works or, I should say, doesn’t work. So part of this is, there’s always a lot of messaging going on both sides of the aisle about what do we think the government should actually be funded at, what is the role of government?

There’s kind of two conversations going on at once. So one is that, the full-year funding bills. What are the limitation provisions? Can abortions be funded or not? All of this stuff. The other conversation is, we’re about to run back into the can again, the can we’ve been kicking down the road for 10, 20—I don’t want to get into how many years we’ve been kicking it down the road. So the can is back up again.

So part of what happened here was there wasn’t a lot of conversation about anybody being willing to come together to kick it down the road a few more days. And everyone looked at each other and said, “Do we really want to shut down the government? Do we really want go through [President Joe] Biden putting barricades in front of the Washington Monument?” And everyone looked and was like, “No, let’s not do that.”

So conservatives put up their firm position on what they wanted to see, which was a real spending cut. There was another group of conservatives that wanted more than that and, I would say, kind of let the perfect be the enemy of the good. So that forced the issue to be like, “All right, fine. We’ll just kick the can down the road for another 45 days, and we’ll set up a Thanksgiving fight.”

Allen: Thanksgiving fight, yes. That is coming down the road, and quickly. Forty-five days, especially in Washington, D.C., that time moves fast.

Now, among the 90 House Republicans that voted against this continuing resolution, this spending bill, and there was also one Democrat who voted against it, do we know why they specifically opposed it?

Stern: I don’t know why the Democrat voted against it, but the 91 Republicans wanted more. They wanted to see real spending cuts. They wanted to see HR 2, the border security package that had been included in Republican bills, signed into law, the debt commission that was going to be done, things like that.

And I’m with them. Spending is out of control. And we say that all the time, but mortgages are out of price right now. The average mortgage on a median home is $300,000 more in interest costs over the lifetime of the mortgage because of federal spending. Let alone inflation. Prices are up 17%, since Biden took office. Groceries alone up more than 20%.

So, I’m with them. We need to secure the border, but we need to cut spending. We need to tie the hands of regulators. These things are essential for the American public.

Allen: So now, Congress has 45 days to do just that. How likely is it that they are going to do just that? They have 12 appropriations bills that they are looking at. They’ve set themselves up, like we said, to have until Nov. 17 to get movement on these. What’s likely going to happen in the next 45 days?

Stern: Well, as the old adage goes, predictions are hard, especially about the future. But I’m actually very optimistic.

So as you pointed out there, for the first time in well over a decade, conservatives have actually sat down and put together appropriations bills that cut spending, that have these provisions that tie the hands of regulators, that they’ve meshed with the border security legislation, etc.

We’ve now had, as you said, four of those bills come through the House. Conservatives have worked together on them. They’re working on the other ones of them. So I think this presents a unified conservative vision of actually making good in these promises, of actually cutting spending, of actually tying the hands of regulators.

So it’s a little bit of anybody’s guess. And in fact, the most traditional thing that happens is another CR that would go to Dec. 12. So, maybe I’ll be back on the show, if that happens.

Allen: It won’t be a Thanksgiving fight. Then, it would be a Christmas fight.

Stern: And we do this every year. But for the first time really in over a decade, I’m actually optimistic we’re going to get real spending cuts, whenever this shakes out.

Allen: Among the 12 appropriations bills, are there any that you’re looking at and it looks like are going to be pretty easy, that there will be agreement on, and that likely we will pass pretty soon here in the coming weeks?

Stern: The four that have gotten done are the ones that there was the most agreement on. All of them have had a lot of fights. They’ve been a little bit of a dumpster fire, in terms of the politics on it. But they’ve gotten done.

And actually, a lot of those four bills, they’ve had provisions at different points in time. People looked and said, “You know what? This is not going to happen. There’s no chance it’s going to get done.” And you know what? They’ve gotten it done.

So what I would say is, the House leadership is, I think, very carefully going from the lowest hanging fruit to the highest hanging fruit. So we’re a third of the way up the tree. We’ll see where the rest of it goes. But I’m still encouraged that there’s room for negotiation in putting these bills together.

Allen: Well, speaking of negotiation, the two major elements that you see Republicans and Democrats fighting over is money related to Ukraine for Democrats and for Republicans, it’s border security. So, you have Republicans digging in their heels, saying, “We’re not moving forward with spending bills that don’t have money for border security.” You have Democrats digging in their heels, saying, “We want more money for Ukraine.” How much funding do they specifically want?

Stern: The numbers are a little fuzzy at the moment. And we’ve heard anywhere from $24 billion to maybe even $60 billion for Ukraine. And part of this also is, on both sides of this, there’s a little bit of an understanding that it’s like, “This is the train that’s leaving the station.” So, even if you only want a little bit, maybe you should ask for a little bit more. This is how these negotiations go.

But I would say this, though. So, we’re looking at kind of a handful of money, relatively speaking, for securing the border. And this is a core function of the government. This is a vital thing for America. If you think about the human trafficking, the drug trafficking, the weapons trafficking, the terrorists, frankly, that cross the southern border, and the Biden administration just lets them right on through. This is absurd.

Now, think of the Ukraine funding on the other side of this. A lot of the money we’ve sent to Ukraine has gone to—and I am not kidding about this—pension funds for civil servants, not related to the military in Ukraine. So we are doing, essentially, civilian union pension bailouts in Ukraine. More, frankly, in some cases than we’ve been doing of anything you could actually rightly call military support.

In fact, even more of the money we’ve sent to Ukraine has gone for economic development that, as best as we can tell, and I really mean as best as we have information on, has gone to the corrupt government officials, to line the pockets of their businesses.

So I think part of what we’re looking at here is that the Left is asking for an enormous amount of money for a war that there is no supervision over, there’s no oversight over, where there are serious and damning reports that have come out about where this money goes, the ability to have oversight, the corruption involved in it; for a war that there is no plan to end, that the Biden administration has made no attempt to actually articulate what the end looks like, what victory looks like.

They’ve been asleep at the switch, bankrolling what has turned into the loss of tens of thousands of lives. I think this is a tragic thing that’s going on.

So I think you hit the nail on the head. This is what the debate is. The Left and the Right are both asking for these things. But I think there is no comparison, in terms of the appropriateness of these two different asks. Securing the border is a must, and the Ukraine funding, the way the Left is asking for it, with no guardrails, this is just absurd. It’s just reckless. And it’s playing with lives. Not just American lives, frankly, but with Ukrainian lives.

Allen: Richard, I want to ask you for a moment to be a realist. With Republicans and Democrats in this real gridlock of both saying, “This is what we want. We’re not backing down,” what’s the likely outcome? Will Democrats get the money that they’re demanding for Ukraine? Will Republicans get the money that they’re demanding for border security?

Stern: It’s a good question. I think it is likely you’re going to get a little bit of both. Now, there’s always a possibility that neither of it happens. But I think what’s likely here is you’re going to get a little bit of both, not enough to make either side happy.

I think the hope from conservative sides is that the most important border stuff gets funded and that the Ukraine money at least is targeted more to actual military aid, and maybe with a little more oversight related to it. So, being a realist here, taking my idealistic hat off, I think that’s probably the most likely outcome.

Allen: OK. All right, let’s talk a little bit about the situation, specifically in the House, some drama in the House. House Republican Rep. Matt Gaetz of Florida, he was not happy about Speaker [Kevin] McCarthy calling for a vote on the continuing resolution. And he says that he’s going to introduce a motion to vacate the chair. And I believe it’s just five Republicans. And if all Democrats vote against McCarthy, that would oust him as speaker. What would that mean for spending negotiations, if House Speaker Kevin McCarthy is removed from his position?

Stern: So, interestingly enough, I don’t know that it actually affects the negotiations that much, other than it delays them. And in fact, if that happens, we might be more likely to get the Christmas fight, as opposed to a meaningful Thanksgiving fight. But fundamentally, the spending negotiations are about where everyone is in Congress. And I think that’s pretty well known.

And you have a lot of different fractious camps across the Left and the Right. So, in an odd sense, I don’t know that those negotiations tee off that much on who’s actually in leadership. I think it has to relate to the lay of the ground that’s already there.

This leadership squabble is something that’s years old in the making. McCarthy has been around. He’s been in leadership for many years, and a lot of the opposition to him is kind of longstanding, long-seated. And Matt Gaetz, of course, is Matt Gaetz. And as much as you can kind of model things out and make guesses about things, you never really can predict the actions of one person. So, we’ll see what happens with that.

Allen: I’m going to allow you to put your optimist hat back on here for a second. And let’s say Congress, they call you up and they say, “What are the cuts we should make?” And they are all on board for fiscal responsibility. Richard, what are the cuts that you would recommend that are strategic, that are wise, that Congress should be making, as they debate the new budget?

Stern: Well, if they actually called me with that, I would faint. But it’s fortunate because we have the annual blueprint we put up every year, so we could direct them to that, while I’m trying to get back off the floor again. But I’d say the way to think of that—and we have 229 different policy memos online in the blueprint that walk through everything we we would do.

But I would say this, in the last six, seven years, we have seen this astronomical plus-up of, at the discretion level in these appropriations bills, agency funding for a little more staff, and a little bit more of this, and a little bit more of that, little new grant program. So there’s no kind of easy fix.

But what I would say is, all of these different groups on the nondefense side, these are regulators, these are grants that subsidize one industry over another industry. I would get rid of almost all of these. The grants that subsidize industries, none of that should exist. All of that is money we steal from the American people to give to a favored industry over everybody else. It’s absolutely a violation of our rights. Those should not be done at all.

On the regulatory side, there’s a handful of regulations that really are there to defend your rights to life, liberty, and property, that are really there to make the government a fulfillment of defending your natural God-given rights. But there’s so much regulatory apparatus that exists beyond that that is, again, there to favor this industry over that one, to favor this kind of area over that area. All of this you could cut.

So what I would say to them is, where you feel comfortable, go through, cut the growth rates on these programs, cut the random excess staffers. Frankly, go back to the text we had of bills in 2016, 2017, back before the massive plus-up in all of these bureaucratic apparatuses, and all these new grant programs. I would tell them to do that, frankly, to go back, look at more of the core functions we used to have.

Allen: And are any members of Congress actually advocating for that?

Stern: A lot are. The Freedom Caucus is. RC does. RC, by the way, puts out an annual budget as well. They mirror a lot of the stuff that we put in there. They talk glowingly about that.

I think at the end of the day, kind of the real crux of it comes to this, people think of government money as free stuff. They think of the Fed as having a magic money tree, and it just produces this money. And then, when the government has programs, it’s doing a favor for you. It’s coming out of your own expense. It’s coming out inflation, taxes at the grocery store and at the pump. It comes out of the taxes that are taken out of your paycheck. And I’ll say this, that’s not even really most of where the burden comes from.

If you look at satellite photos of North and South Korea, what you’re seeing in South Korea is a vibrant, wealthy, technologically-advanced society, where people live long, healthy lives, can form families. And in North Korea, at night, there’s nothing. Oh wait, there is a little bit of light, mostly the palace for the emperor.

But here’s really what that is. At some level, the difference between them is the regulatory apparatus. It’s the heavy hand of the state, having pushed the North Korean population to remain in the poverty they had prior to the industrialization of South Korea. That industrialization in South Korea was because of the free system, because of the free market, because they believed in people to build, to dream, to innovate, and they added South Korea to the growing global economy.

When we do these things, when we regulate, we tax, we print money, we levy the inflation taxes, most of that destruction is—there’s a South Korea out there, in a parallel world. There’s what the U.S. could have been. We could have been twice as wealthy as we are as a country easily today, if not more than that, if we had not built on the regulatory and tax structures we’ve had over the last several decades.

So the hard part of this is, I know that people’s lives are cut short, that their happiness is cut short, that we have missed out on enormous amounts of opportunity, precisely because we didn’t continue to have the faith to believe in the American people to work together, to build and dream a brighter and newer future. I can’t point to that alternate world, tragically. But I know, and I know from history, that’s what we lost out on.

So my encouragement to people listening, my encouragement to the members of Congress is, have that faith again. Get the government out of the way and have the faith that if you do that, and you come back in a generation or two, the American people will have built wonders that no one would’ve thought possible.

Allen: Is there a world where we could have that, where we could turn it around? And right now, in this next 45-day period, what is at stake? What are the actions that could be taken in order to set us on that positive trajectory?

Stern: Honestly, you look at the Tax Cuts and Jobs Act that got passed. You had an immediate economic high. Unemployment went to 50-year lows. And that’s just the beginning, frankly, of the dividends that that tax bill will pay for generations to come.

So if we cut spending, if we got rid of the regulators, if we got rid of these grant programs that strangle some businesses at the expense of others, you’d see immediate positive economic growth. And then, that high growth rate would be sustained for years to come. And in a generation, you might have half, again, the wealth per capita of the U.S. In two generations, you’d be looking at more than doubling the economy from where we would’ve been, if we hadn’t done those things.

So it starts with cutting spending. It starts with cutting the growth rate of spending. It starts with tying the hands of the regulators, getting the government out of the business of micromanaging the economy. And they could make a down payment on that tomorrow, or in 45 days, on the appropriations bills.

Allen: The Heritage Foundation’s Richard Stern. Richard, I know that we’re going to be talking with you quite a bit more over the next 45 days. So thanks for being here with us and breaking this down.

Stern: Thank you so much, again.

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About the Author

Tony Beasley
Tony Beasley writes for the Local News, US and the World Section of ANH.