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By Katie Cross, Senior Associate,
Blakey & Agnew
After 35 days, the longest federal government shutdown in history ended on January 25, 2019. The shutdown resulted in about 25 percent of the total federal government being shuttered. Not only were thousands prohibited from going to work, or else called into work without pay, but federal actions also had very local impacts. In the transportation world, that was seen in discontinued funding for transit systems and in Transportation Security Administration agents at airports working without pay. But, under a deal struck by the President and Congress, all departments reopened on January 25 at 10 p.m. for a period of three weeks, through February 15. Prior to that date, Congress and the President must again come to an agreement – either on a full-year fiscal year 2019 deal for the remaining bills or on another extension.
It remains unclear if a deal will be struck before the February 15 deadline. The partial government shutdown was the result of a disagreement over funding for a border wall and neither side seemed to move much during the 35-day shutdown. In fact, it seems as though the President is still committed to the border wall funding – during his second State of the Union address on February 5, President Trump called on Republicans and Democrats to work together to "pass a bill that will fund our government, protect our homeland and secure our very dangerous southern border," later noting that he would "get [the wall] built." Meanwhile, Democrats have not moved on their position either – in the Democratic Response to the State of the Union, Stacey Abrams said "America is stronger with immigrants, not walls."
With neither side seeming like it is willing to negotiate, some have suggested tying border wall funding to another looming fiscal cliff – the nearing debt ceiling. The phrase "debt ceiling" gets thrown around at least annually as the U.S. walks right up to the edge before Congress passes legislation increasing or suspending it. The debt ceiling is the limit on the total amount of money the federal government can borrow. It was created to allow the U.S. Treasury Department to issue bonds to pay U.S. bills without needing to ask Congress for permission. However, the federal government's budget typically calls for more spending than it takes in each year. This means Congress has had to raise the limit multiple times – lifting it over 100 times since its establishment in 1917 and suspending it altogether multiple times as well. Most recently, the
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Bipartisan Budget Act of 2018 included a suspension of the debt ceiling until March 2, 2019.
As U.S. politics have become increasingly divided, raising the debt ceiling has been used as a leveraging tool. This is a potentially dangerous way to do business. If Congress fails to raise the debt ceiling and the government hits the spending limit, the Treasury Department is forced to use "extraordinary measures" to avoid default. That means temporarily shifting funds between accounts to continue funding the government's obligations. However, these maneuvers would likely only keep the government running and paying down its debts for a few months. Following the exhaustion of extraordinary measures, the Treasury Department would no longer be able to issue debt and would then rely upon incoming receipts – which typically do not meet the annual funding needs. Therefore, the government would not have enough funds to pay its obligations and would have to choose which payments to make. Because defaulting on payments could have large economic ramifications, it is likely the government would instead cease the issuance of Social Security or other benefits instead of missing a debt payment. However, it is unclear what would happen if the Treasury Department did reach that point.
Hitting the debt ceiling could be like shutting the federal government down again but with more expansive and long-term consequences. While the March 2 deadline is close, it is likely that the Treasury Department can use extraordinary measures until mid-summer to keep making all necessary payments, but at some point in the near future Congress will need to address it. The looming uncertainty of both the FY19 appropriations bills and the debt ceiling is harmful across the board but particularly to those industries that rely upon long-term planning – like transportation.
Blakey & Agnew, LLC is a public affairs and
communications consulting firm based in
Washington, DC.
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