House Republicans Unveil Stopgap Plan to Fund Federal Government

House Republicans have presented a stopgap plan to fund the federal government and avert a shutdown. Congress now has less than a week to pass the necessary legislation.

A Two-Step Continuing Resolution

House Speaker Mike Johnson has proposed a "two-step" continuing resolution (CR) as a temporary measure to fund government activities while Congress finalizes the appropriations bill. Typically, CRs are used to provide temporary funding, and they have been enacted in nearly all fiscal years since 1997. However, Johnson's proposal stands out due to its unique approach.

Under this plan, some appropriation bills would be extended until January 19, while others would be extended until February 2. Johnson believes this two-step continuing resolution is crucial for House Republicans to better advocate for conservative victories and prevent excessive spending bills from surfacing during the holiday season.

Time is Running Out

Congress must pass a funding measure by November 17 to avoid a government shutdown. However, disagreements within the majority party have hindered efforts to pass the appropriations bill, as the far-right caucus of the GOP squares off against centrists.

Seeking Common Ground

Johnson's approach, also known as a "laddered" CR, aims to find common ground between different factions. Whether or not it will succeed remains uncertain.

Unveiling their stopgap plan, House Republicans hope to navigate through these challenges and ensure the stable funding of the federal government.

Johnson's Laddered Approach Faces Pushback from Democrats

Analyst Isaac Boltansky from BTIG suggests that the laddered approach proposed by Johnson may receive pushback from Democratic House members due to its complexity. Similarly, it may face resistance in the Senate for the same reason. Conservative Republicans demand significant spending reductions, while Democrats, who have control of the Senate, oppose deep spending cuts.

Despite the challenges, Johnson faces a similar situation as the previous Speaker. Unfortunately, more than a month of the legislative calendar has been wasted in trying to find a solution.

The impact of Johnson's plan on the markets remains uncertain. The fight may introduce some volatility in equities, but historically, government shutdowns have had little effect on the stock market. However, the bond market may be more impacted, considering recent rallies and potential turmoil in Washington.

Moody's Investors Service downgraded its outlook on U.S. government debt to negative from stable, citing political polarization and the growing federal deficit as key factors. It is important to note that Moody's retained its top Aaa rating for U.S. credit, unlike other credit-rating firms such as Fitch and S&P who downgraded U.S. credit in the past.