Government shutdown: why new talks in Congress might avert another one

Congress ended one government shutdown this week, but did it also just set the stage for another shutdown come January?

Maybe so. This week’s congressional action, after all, was an exercise in moving the goal posts, not a resolution of the fiscal debate between the parties. And setting up a bipartisan committee to hash things out is no guarantee of reaching the fiscal end zone. Exhibit A is what happened in similar circumstances back in 2011.

But things don’t necessarily have to play out that way. Much as gridlock has become the way of life in Washington, nobody views “shutdowns forever” as a viable way forward, either.  

Getting to yes on a new federal budget hinges on the leaders of the newly formed bipartisan conference committee: Republican Rep. Paul Ryan of Wisconsin and Democratic Sen. Patty Murray of Washington.

If the two parties don’t reach a deal and have it approved in the House and Senate by Jan. 15, the next partial shutdown of federal services will begin.

The hurdles to a deal are admittedly high.

The two leaders of this conference committee start leagues apart. Senator Murray championed a Democratic budget that includes lots of new tax revenue and relatively little in entitlement reform or other spending cuts. The Ryan-flavored House budget envisions just the opposite.

And if compromise is hard for the two of them, it may be harder still for a committee that totals 29 members in all – with some House and Senate members from each party.

But some factors might nudge this process toward success – at least if success is defined as avoiding another shutdown:

The deal doesn’t need to be a “grand bargain.” The stakes in these talks are not as high as they were in 2011, when a bipartisan House-Senate committee sought a bargain to achieve major deficit reduction over a 10-year period. That’s partly because federal deficits have fallen since then and partly because politicians are choosing to be realistic heading into an election year. Ryan and Murray have dialed down the expectations meter.

In the end, America might get a deal that simply funds the government through the next election. The accord might emerge within the Ryan-Murray talks, or it could be brokered in the event of a collapse of those talks, which have a mid-December deadline.

Politicians have just been burned by failure. During the standoff that began with Congress failing to agree on a budget for the new fiscal year starting Oct. 1, Democrats and Republicans alike saw their poll ratings go down. Approval ratings for Republicans sank to a two-decade low according to Gallup, while satisfaction with the way the government is being run plunged to a record low for a period that stretches back to include the Vietnam War and Watergate scandal.

Not every Republican is determined to avoid another shutdown. But Senate minority leader Mitch McConnell, for one, said he doesn’t want to repeat what proved to be a losing strategy.

“One of my favorite old Kentucky sayings is there’s no education in the second kick of a mule,” he told The Hill news organization Thursday. Referring to the shutdown, he added: “I think we have fully now acquainted our new members with what a losing strategy that is.”

An election draws closer. Come January, the 2014 election will be on the horizon, with control of the House and Senate at stake. This could serve to amplify concern about the point just made: that shutdown isn’t popular. President Obama has just dished out this advice to Republicans: If you don’t like a particular policy (such as Obamacare) then “win an election.” They’ll want to take him up on that challenge.

“Public opinion polls are clear” in opposition to a shutdown, write economists in a new Bank of America Merrill Lynch Global Research report. “We expect most politicians to heed that advice, with less dramatic brinkmanship moments in the run-up to the election.”

All this doesn’t mean that even a modest compromise will be easy. A central challenge in the talks will be how to deal with the “sequester,” the automatic spending cuts imposed when the 2011 budget effort fell apart.

Republicans don’t like the deep cuts the sequester imposes on national defense. Democrats don’t like the hit to domestic programs. Neither side likes the arbitrary nature of the cuts.

But talking about how to replace the sequester can quickly lead into thorny questions of taxes and entitlements. One solution, for example, could be a deal that eases up on many of the sequester’s cuts, paying for it with a combination of entitlement reforms and tax reform that results in some new revenue. With Democrats wary of anything that could be called benefit cuts for seniors and Republicans opposed to raising taxes, this is the stormy political region where the 2011 grand-bargain talks foundered.

So, yes, another shutdown in January looks possible. Many voters would disapprove, but many of the most motivated voters – the Republican and Democratic bases – don't want to see elected officials go all-in for compromise, either. 

Remember, though, that the shutdown caused visible damage to the economy as well as to lawmakers' reputations.

Gregory Daco of Oxford Economics in New York predicts that the Ryan-Murray effort won't result in a long-term deal to reduce deficits. But even if the sequester is not fully replaced, it could be modified so that spending cuts are apportioned in a more flexible way.