USA is threatened with a shutdown
McCarthy is fighting with his own party over the budget – and for office
September 30, 2023, 6:16 p.m
The USA is heading for another budget freeze. This time, however, hostile Republicans are playing a leading role. The President of the House of Representatives, McCarthy, has long been concerned not only with a compromise but also with his political survival.
Hours before the end of the deadline, the President of the US House of Representatives, Kevin McCarthy, is trying to avert the impending shutdown in the US budget dispute, according to an insider. It was said that he wanted to lobby his Republicans for a draft that would provide for disaster aid. This could also be supported by the Democrats.
The fronts between President Joe Biden’s Democrats and Republicans, as well as between various Republican blocs in the House of Representatives, have hardened. This means that a budget freeze to finance federal authorities and institutions – commonly called a “shutdown” – is getting closer. If no breakthrough is achieved by midnight local time (6 a.m. CEST Sunday), hundreds of thousands of public servants in the world’s largest economy will face compulsory unpaid leave.
Numerous offices, museums and national parks will then have to close, at least temporarily. However, the employees will receive their wages retroactively after the shutdown ends. State employees considered essential – including police officers, soldiers and air traffic controllers – must initially continue to work without pay.
Small Republican group takes a stand
In order to avoid the fourth shutdown in a decade – and the 15th since 1981 – the two chambers of Congress must agree on a budget. The dispute over the budget regularly boils over as the start of the new budget year on October 1st approaches. The last and longest budget freeze – from December 2018 to January 2019 under President Donald Trump – lasted 35 days.
This time, however, the situation is particularly precarious. Not only is there a deep divide separating the two increasingly irreconcilable parties. A power struggle is also raging within the Republican Party between comparatively moderate representatives and a small group of ultra-conservative representatives in the House of Representatives. McCarthy is also under attack. So far he has not been able to get the arch-conservatives in his party to cooperate. He even has to fear being deposed by the right-wing hardliners in his own group if he compromises with the Democrats.
In the Senate, representatives from Democrats and Republicans have presented a compromise proposal for an interim budget that would ensure funding for federal authorities until November 17th. This would buy time for further budget negotiations. However, McCarthy does not want to introduce this proposal in the House of Representatives. Rather, he presented his own proposal – which then failed in a vote on Friday due to resistance from his own ranks. 21 Republicans voted against McCarthy’s plan, a serious defeat for the 58-year-old.
A budget freeze would have negative effects on the entire economy. The investment bank Goldman Sachs estimates that economic growth could be 0.2 points lower – for each week that the shutdown lasts. The rating agency Moody’s has already warned that a financial freeze would also have a negative impact on the US’s creditworthiness. That, in turn, would increase the cost at which the U.S. can borrow money.