U.S. Federal Government Shutdown: Daily Update #6

by Manatt, Phelps & Phillips, LLP

The Elevator Speech Overview
Tuesday marks day eight of the government shutdown and nine days until the Treasury says the debt ceiling will be reached and the federal government can no longer pay for all of the financial obligations Congress has enacted. President Obama and Speaker Boehner held dueling press conferences to reiterate their positions. The President also called Speaker Boehner personally. Neither Republicans nor Democrats showed any sign of wavering in their previously staked out positions.

U.S. House of Representatives
On Tuesday, the House passed another targeted continuing resolution (CR), this time focused on funding Head Start programs. The House also considered a measure that would ensure excepted federal employees (those not furloughed) are paid despite the government shutdown. The House then moved to consideration of the plan announced by Speaker John Boehner (R-OH) today of creating a bipartisan, bicameral committee to negotiate the debt ceiling increase. Also referred to as a “supercommittee,” a similar group was convened in 2011 but failed in its effort to avert sequestration budget cuts from occurring. House and Senate Democrats, as well as President Obama, expressed opposition to the Supercommittee Sequel in advance to its consideration on the floor.

Members expect that the current standoff will last at least until the 17th, if not Halloween. Although the Treasury has given October 17th as the date the U.S. will hit its debt ceiling, informed sources speculate that the Treasury has a series of measures in place that can probably sustain past the 17th, creating the possibility of an even more extended fight. A press conference by Treasury on the subject is expected as early as Thursday.

U.S. Senate
On Tuesday, Senate Majority Leader Harry Reid (D-NV) requested a live quorum call in the Senate, which would bring all senators to the floor, in order to have a discussion on the budget and debt issues. Attention has focused on Majority Leader Reid in recent days as one of the driving forces behind Democrats commitment not to negotiate while the government remains shutdown and default looms. Reid continues to have unprecedented unanimity among his caucus for the position that a clean CR should be passed, even if temporary, while spending levels for FY 2014 are negotiated. Majority Leader Reid, President Obama, and Congressional Democrats continue to seek nothing other than re-opening the government before starting the budget discussions.

Majority Leader Reid, together with Senate Finance Chairman Max Baucus (D-MT), introduced a bill to the Senate floor Tuesday to suspend the federal debt ceiling until December 31, 2014, bypassing the committee process. Based on the procedural rules governing his action, the final vote is not likely to occur until October 16. Assuming the support of all 54 Democrats in the Senate, which is not guaranteed, Democrats would still need the support of six Senate Republicans to overcome a filibuster of the bill.

The White House
Following the Tuesday afternoon announcement of Speaker Boehner’s proposal to form a bipartisan, bicameral Supercommittee Sequel to negotiate over the debt ceiling, President Obama immediately called the Speaker. President Obama again reiterated that he will not negotiate while the government is shut down and the threat of default hangs over the country. He urged Speaker Boehner to allow a vote on a clean CR, which many believe has enough votes to pass. President Obama held his own press conference later in the afternoon, again calling on Republicans to pass a clean CR and clean debt ceiling limit. Confirming what one of his senior aides said Monday, President Obama said he would be willing to consider a short-term CR and increase in the debt ceiling limit. Providing a temporary respite to the threat of default, Democrats say a short-term debt ceiling increase could offer a window of opportunity for negotiations over long-term federal spending once the government was re-opened.

The White House also said Tuesday that the president will veto legislation to pay excepted, i.e. non- furloughed, federal government employees during the government shutdown, should the House bill reach his desk.

Agency Spotlight: Department of Housing and Urban Development
The Department of Housing and Urban Development (HUD) responsibilities include operation of the Federal Housing Administration (FHA), mission regulation of Fannie Mae and Freddie Mac, administration of many affordable housing and homelessness programs, and maintaining current information on housing needs and market conditions, among other things. With approximately 96% of its federal employees furloughed, HUD’s operations are drastically reduced. Most HUD field offices are closed and loan processing will be significantly delayed. Suspended services include: the insurance of Title I loans; the underwriting and approval of loans for lenders in pre-closing; approval of lender applications; award announcements; Real Estate Assessment Center (REAC) inspections; and the processing of grantee requests for reimbursement. Services that will continue during the shutdown include: access to grants.gov; HUD homeless assistance grants; guarantee of mortgage backed securities by Ginnie Mae; endorsement of single family loans; issuance of FHA case numbers to lenders; and disbursal of payments for existing obligations.

HUD does not expect a short shutdown to significantly impact the housing market; a longer shutdown does have the potential to impact the entire housing market as shutdown periods could be extended and home sales may decline. For more information on specific activities, please see the HUD Contingency Plan.

Public Opinion
As noted by nationally recognized political analyst Charlie Cook, while nobody looks “good” in situations like this, there is not a single reputable poll that indicates Republicans are even holding their own in the view of the public. In fact, while Congressional Democrats have lost a little ground in their standing, the GOP appears to be performing much worse in the minds of voters. Conversely, President Obama actually gained in public standing, albeit modestly, since the shutdown began. The President has had a net gain of 3% in his approval while Republicans have had a net loss of 9%.

Noted in the last update, results from the Washington Post-ABC poll conducted October 2-6 are more illuminating when compared to results of the previous poll conducted September 25-29:

  • The way Barack Obama is handling negotiations over the federal budget
    • 45% Approve (+4% change since September)
    • 51% Disapprove (+1%)
    • NET CHANGE = +3%
  • The way Republicans in Congress are handling negotiations over the federal budget
    • 24% Approve (-2%)
    • 70% Disapprove (+7%)
    • NET CHANGE = -9%
  • The way Democrats in Congress are handling negotiations over the federal budget
    • 35% Approve (+1%)
    • 61% Disapprove (+5%)
    • NET CHANGE = -4%

More from the Pew Research Center poll conducted October 3-6:

  • 28% of Americans say they or a family member have been personally inconvenienced by the federal government shutdown.
    • During the last shutdown, in January 1996, only 16% of people answered the same.
  • 13% of Americans overall say they have contacted a public official or signed a petition to express their opinion about the shutdown.
    • 15% - Republicans who have contacted a public official or signed a petition.
      • 24% - Tea Party Republicans.
      • 11% - Non-Tea Party Republicans.
    • 13% - Democrats who have contacted a public official or signed a petition.
    • 14% - Independents who have contacted a public official or signed a petition.

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