U.S. Federal Government Shutdown: Daily Update #1

by Manatt, Phelps & Phillips, LLP

Monday’s Highlights
First Shutdown since 1996
The Office of Management and Budget (OMB) Director formally notified federal agencies to execute their plans for the government shutdown shortly before midnight on Monday. Many federal employees reported to work Tuesday morning to take part in shutdown-related activities and were then directed to leave their posts and head home. Non-essential employees were expected to turn in or power off their government-issued cell phones, blackberries and other government communications devices as they are prohibited from working outside of the office; they are also required to refrain from checking dot-gov emails. Additionally, many government websites have taken themselves offline due to lack of funding, including: the Library of Congress, the USDA and the FTC, for example.

Inside the beltway, Congressional and Administrative staff and officials are making preparations for the shutdown to last up to two weeks. With Continuing Resolution (CR) focused maneuvering expected to preoccupy Congress for most of this week, the concern in Washington is that the CR negotiations would leave only one more week to establish a new debt ceiling before the U.S. reaches its borrowing limit on October 17. A failure to raise the debt ceiling will have significantly more serious ramifications than the government shutdown, impacting the creditworthiness of the United States Treasury and causing ripple effects through the global economy.

The White House
Speaking from the Rose Garden near mid-day, President Obama asserted that Republicans “don’t get to hold the entire economy hostage over ideological demands,” and reiterated that he will not accept a CR that blocks federal funding for the ACA or delays its implementation. He emphasized Tuesday’s rollout of the ACA’s health insurance exchanges as scheduled and cited HealthCare.gov’s more than 1 million visitors yesterday morning alone. The President also made clear that he will not negotiate with Republicans over the debt ceiling, as the debt ceiling increase is necessary to fund the programs and expenditures that Congress itself has already put in place.

The Senate
Senate Democratic leaders held fast in their position in alignment with President Obama that the House of Representatives should put up for a vote a “clean” CR that would fund the government through December while full fiscal year 2014 spending levels could be negotiated. Senate Republicans have tepidly supported their House GOP colleagues; however several notable Senators have openly dismissed the House conservative approach saying they have marched into a “box canyon” and that there is “no end game”.

A Potential Shift in Strategy by the House Republican Conference
Attempting to create some movement, the House GOP is now pursuing a targeted CR strategy that would attempt to pass legislation in a piecemeal fashion by focusing bills on narrow constituencies. Late last night the House attempted to pass three narrowly crafted CRs that would fund the District of Columbia, Veteran Benefits, and the National Park Service until December 15. However, the bills were defeated because they were brought to the floor under a procedure known as “Suspension of the Rules” that required a 2/3 majority to pass (see discussion below and what this procedural maneuver reveals). Senate Democrats had quickly rejected the idea of passing narrowly cast bills and are maintaining their position of a comprehensive CR. Senate leaders argue that funding only the portions of government that the House GOP likes while allowing the needs of other constituencies to be held hostage was unacceptable. The White House has also threatened to veto such targeted CRs.

Another push by House Republicans may focus today on passing the full CR with just one condition (known as the “Vitter amendment”) to eliminate a current provision that allows Members of Congress and their staff to receive an employer contribution for enrollment in the ACA health insurance exchange. Under the ACA, Congressional staff and Members of Congress must enroll in the exchange and will receive an employer contribution similar to the employer contribution in the private sector, to do so. Republicans have characterized this contribution as a “subsidy” for Members of Congress and their staff, although this employer contribution (provided by the US Treasury in the instance of government workers) is similar to the employer contribution required in the private sector. The GOP theory behind this strategy is that it would be a difficult vote for Democrats to take and would therefore force bi-partisan support, thereby avoiding a protracted fight and allow the debt ceiling debate to begin more quickly. However, news reports of House Speaker John Boehner’s active participation in seeking the employer contribution for Members and Staff have muddled the message for the House GOP. These reports were based upon numerous leaked email exchanges between Boehner’s office and other high level government officials, including the White House Chief of Staff’s office.

Procedural Maneuvers are Telltale Sign
The House GOP used a procedure known as “Suspension of the Rules” in order to consider and hold votes on the limited scope CR’s late Tuesday night. Under this procedure, bills may be brought to the floor without abiding by the normal Rules of Procedure adopted by the House of Representatives at the beginning of each Congress. However, under the “Suspension Calendar”, as it is known, a bill must achieve a 2/3 majority in order to pass. This calendar is usually reserved for non-controversial measures that can be expeditiously dispatched by the House. The advantage for the House GOP in using this procedure was that it denied House Democrats a specific motion – the Motion to Recommit. Under the Motion to Recommit, the Minority Party is allowed the opportunity to hold a vote on an alternative proposal. In this instance, the fear among House GOP leaders was that Democratic Leader Nancy Pelosi would force a vote in the House on the “Clean CR” and that it would pass. For those who watch such procedures, this was a telltale sign that GOP leaders recognize that should they bring a clean CR to the floor, enough Democrats and Republicans would likely vote “Aye” that the measure would pass and the opportunity to extract concessions from the President would be gone. Further, House GOP leaders do not want to expose their own membership to a vote that could force them to vote AGAINST a clean CR and suffer political consequences at home for doing so.

Pay Our Military Act
Signed into law by President Obama Monday evening (September 30, 2013), the Pay Our Military Act appropriates funds for military salaries as well as salaries for Department of Defense and Coast Guard civilian employees and contractors whose work supports active duty troops. The bill’s provision will be valid for the entire fiscal year, ensuring the military is paid during any government shutdowns this year. This bill avoids any accusations that the government shutdown will cause active-duty military personnel from receiving pay.

Impact of Furloughs
The effects of the furloughs of non-essential federal employees will be felt well beyond the DC metro area. Along with DC, Maryland, and Virginia, Texas and California are among the five states that have more than 100,000 full-time permanent federal employees that are at risk of furlough. With between 50,000 and 100,000 federal employees, Washington, Pennsylvania, New York, Georgia, and Florida are also likely to feel the impact keenly. States such as Montana, Wyoming, Nebraska, Iowa, Maine, New Hampshire, Rhode Island, Connecticut and Delaware should have the least immediate economic impact from federal furloughs as their federal employee populations are all below 10,000. Cities such as New York, Virginia Beach, Baltimore, San Diego, Philadelphia, and Atlanta are likely to be the most affected by furloughs (aside from DC) based on the number of federal employees by metropolitan area, although Virginia Beach with its heavy military population may be spared as a result of the Pay Our Military Act.

Public Opinion
According to a Quinnipiac poll of American voters released today:

  • The government shutdown
    • Republicans: 44% oppose, 49% in favor
    • Democrats: 90% oppose, 6% in favor
    • Independents: 74% oppose, 19% in favor
  • Congressional approval ratings
    • Republicans: 74% disapprove, 17% approve (the lowest approval rating ever)
    • Democrats: 60% disapprove, 32% approve
  • The Affordable Care Act (ACA), otherwise known as “Obamacare”
    • 47% oppose
    • 45% support
  • Congress shutting down the federal government in order to block implementation of the ACA
    • 72% oppose
    • 22% support
  • Congress stopping the ACA’s implementation by cutting off the law’s funding
    • 58% oppose
    • 34% support
  • Congress blocking an increase in the nation’s debt ceiling as a way to stop the ACA
    • 64% oppose
    • 27% support

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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