US House Republicans eye plan to avert government shutdown as Moody's warns

[November 11, 2023]  By David Morgan

WASHINGTON (Reuters) -U.S. House of Representatives Republicans are due to unveil a stopgap measure on Saturday aimed at averting a government shutdown, the latest in a series of standoffs that contributed to Moody's lowering its outlook on the nation's credit.

The move to change its outlook to "negative" from "stable" by the last major credit ratings agency to maintain a top "AAA" rating on the U.S. government came six months after Congress brought the nation to the brink of default on $31.4 trillion in debt, and just a week before federal agencies will run out of money without congressional action.

Newly installed House Speaker Mike Johnson, the top Republican in Congress, has spent the past several days discussing options with his slim 221-212 House majority, including how long to extend stopgap funding while lawmakers negotiate spending legislation for the 2024 fiscal year that runs through Sept. 30.

"Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability," Moody's said in a statement.

The move's immediate effect was renewed finger-pointing between President Joe Biden's White House and Republicans, as each sought to blame the other.

"Moody's decision to change the U.S. outlook is yet another consequence of congressional Republican extremism and dysfunction," White House spokesperson Karine Jean-Pierre said.

Johnson cited the outlook change as "the latest example of the failure of President Biden and Democrats' reckless spending agenda." In a statement, he vowed to "fight to get our finances in order."

Moody's announced its decision after the federal government ended the last fiscal year with a $1.7 trillion deficit -- its largest outside the depths of the COVID pandemic. That reflects both the toll of high spending and past tax cuts.

FRIDAY FUNDING DEADLINE

The House and Democratic-led Senate must agree on a spending vehicle that President Joe Biden can sign into law by Nov. 17, or risk a fourth partial government shutdown in a decade that would close national parks, disrupt pay for as many as 4 million federal workers and disrupt a swath of activities from financial oversight to scientific research.

House Republicans hope to vote on Tuesday on a stopgap measure, which could extend discretionary funding for federal agencies into mid-January.

Some House Republicans have called for a "clean" continuing resolution, or "CR," that would keep funding at current levels and contain no partisan policy riders such as immigration restrictions at the U.S.-Mexico border that Democrats view as "poison pills."

Newly-elected U.S. House Speaker Mike Johnson (R-LA) walks from his office to the House floor at the U.S. Capitol in Washington, U.S., October 26, 2023.REUTERS/Sarah Silbiger

"Plainer is better. The things you should put on there are things that both sides agree to. Don't use it as an effort to jam somebody," Representative Tom Cole told reporters before lawmakers left Washington on Thursday.

"That's my opinion," Cole said. "But I would be supportive of whatever the speaker puts out."

But Johnson has also been under pressure from Republican hardliners for a CR with spending cuts, conservative policies and a complex structure that lawmakers of both parties say could raise the chances of a partial shutdown by making it harder for the House to reach agreement with the Democratic-led Senate.

Representative Chip Roy, a prominent member of the hardline House Freedom Caucus, said he could accept a stopgap measure that also contains aid to Israel in its war with Hamas.

"My main thing is: I want spending levels to be down; I want us to separate Israel; and I want us to be able to deal with the border," the Texas Republican said.

Roy said he wanted Congress to handle Israel aid separate from that for Ukraine -- while Biden has sought to package the two together, adding, "If (Israel) rides with a CR ... fine."

House Republican hardliners have been pushing to cut fiscal 2024 spending below the $1.59 trillion level that Biden and Johnson's predecessor agreed in the May deal that averted default. But even that is a small slice of the overall federal budget, which also includes mandatory outlays for Social Security and Medicare, and topped $6.1 trillion in fiscal 2023.

Johnson, who won the speaker's gavel less than three weeks ago, could put his own political future at risk by opting for a clean CR that can win enough ready bipartisan support to pass through Congress quickly.

His predecessor, Kevin McCarthy, was ousted from the job by eight Republican hardliners early last month, after he moved a bipartisan measure to avert a shutdown on Oct. 1, when fiscal 2024 began. McCarthy opted for the bipartisan route after hardliners blocked a Republican stopgap measure with features intended to appease them.

(Reporting by David Morgan; Editing by Scott Malone and Daniel Wallis)

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