U.S. Federal Government Shutdown: Final Update

by Manatt, Phelps & Phillips, LLP

The Elevator Speech Overview
Wednesday – day sixteen of the government shutdown with one day remaining until the debt ceiling was predicted to hit – saw the late night resolution of the government shutdown and the debt ceiling crisis… at least temporarily. The Senate-brokered deal was finalized Wednesday and moved quickly to a vote, passing first the Senate and then the House with no significant delays. The legislation provides funding for the government until January 15 and suspends the debt ceiling until February 7. President Obama signed the Continuing Appropriations Act, 2014 into law shortly after midnight, officially ending the shutdown and averting a federal default. Lawmakers must now negotiate a long term resolution to the Fiscal year 2014 budget, spending and debt issues before the new deadlines early next year are upon them.

U.S. Senate
Unhappy with the deal taking shape in the Senate, the House GOP leadership attempted to develop its own agreement on Tuesday but failed to garner enough support to even bring the measure to a vote. After that measure was pulled from consideration in the House, Senate leaders resumed their halted negotiations Tuesday night and finalized the deal on Wednesday morning. Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) announced the deal on the Senate floor midday Wednesday.

With a few additional changes to the deal that had taken form on Monday, the finalized agreement authorizes funding for the government until January 15 at current spending levels and suspends the debt ceiling until February 7 while preserving the Treasury’s ability to use “extraordinary measures” to push back the hard deadline. The deal retroactively funds the government from October 1, guaranteeing back pay for furloughed federal employees. The agreement creates a bicameral bipartisan conference on the budget and directs conferees to reach a deal by December 13. It also requires the additional income-level verification for individuals receiving government health care subsidies under the Affordable Care Act (ACA) and grants the District of Columbia authority to manage its own budget through fiscal year 2014.

The final deal dropped provisions discussed in early negotiations. The deal does NOT delay the reinsurance tax that is part of the ACA (an additional fee on health care plans that is intended to distribute the risk and help insurers that cover the sickest patients); does NOT take away health care subsidies for Members of Congress, the Administration, and their staffs; and does NOT give federal agencies additional flexibility in implementing the sequester budget cuts. Further, the agreement does NOT defund the Affordable Care Act (Obamacare) or delay its implementation – the original demands being sought by Tea party conservatives that led to the shut down nearly two weeks ago.

With only one day until the Treasury said it would run out of options to pay the bills of the United States, Senate leadership was anxious to pass the legislation quickly. Procedural rules in the Senate mean that even one Senator could significantly delay a vote, however, so Senator Ted Cruz’s (R-TX) response to the deal announcement was watched closely, among others. No effort was made to delay the vote and the bill passed 81-18. Among Republicans, 18 opposed the deal – including Senate Minority Whip John Cornyn (R-TX) – while 27 supported the deal. No Democrats opposed the bill. The measure was sent to the House for a vote.

U.S. House of Representatives
House Republicans were closely watched Wednesday for their reaction to the Senate deal. After a closed-door conference meeting Wednesday afternoon, every member of the elected Republican leadership team pledged support for the bill. The House held the vote around 10:00 pm, passing the bill 285-144 shortly thereafter. 198 Democrats and 87 Republicans voted in favor of the bill; 144 Republicans opposed the bill, including Budget Chairman Paul Ryan (R-WI). 2 Democrats and 1 Republican did not vote. By allowing the bill to come to the floor for a vote, Speaker John Boehner (R-OH) broke the “Hastert rule,” which says the speaker will not allow legislation to come to the floor with the support of the “majority of the majority” (117 Republicans). Speaker Boehner has notably broke this rule to allow votes to resolve other recent crises. Nonetheless, Speaker Boehner received a standing ovation during the Republican conference meeting earlier in the day and seems to have gained in support from more conservative members of his conference.

The White House
The White House praised Senate negotiations throughout the day Wednesday and expressed support for the deal to reopen the government. During a press conference Wednesday evening shortly after the Senate voted, President Obama promised to sign the bill “immediately” after it was passed. Shortly after midnight, President Obama signed the Continuing Appropriations Act 2014 and the Office of Management and Budget (OMB) issued the official order for federal agencies to reopen on Thursday. Furloughed federal employees were greeted by a 6:00 am wake up call at their homes directing them to report to work today. Delays will likely continue in the short-term as federal employees sift through emails, get caught up on paperwork, deal with backlogs, and ramp up normal operations.

Agency Spotlight: Department of Commerce
The Department of Commerce (DOC), charged with promoting economic growth and job creation, is partially shutdown with 61% of its workforce furloughed. The Patent and Trademark Office (PTO) has enough funding from other appropriations to remain fully open for up to four weeks, approximately, at which point roughly 99% of its employees will be furloughed if the government shutdown has not been resolved. (If the PTO needs to furlough staff, the DOC will only have 13% of its workforce remaining.) Excluding the PTO, the majority of the non-furloughed employees work at the National Oceanic and Atmospheric Administration (NOAA) and will continue: maintaining climate monitoring research; activities to ensure critical satellite date is not disrupted; law enforcement activities to protect federal trust resources; and activities required to provide the nation with weather, water, climate and air quality forecasts and warnings for imminent threats. Other continued DOC activities include: all services of the National Technical Information Service (NTIS); export enforcement; fisheries management activities; and the maintenance, continuity and protection of certain research property and critical data records.

Suspended activities include: assistance and support to recipients of grant funding; technical oversight of non-mission essential contracts; most services and activities provided by the International Trade Administration; and service and activities provided by the Bureau of Economic Analysis, Economic Development Administration, Economics and Statistics Administration, Minority Business Development Agency and the Bureau of the Census. The release of key economic data will be delayed by furloughs at the DOC.

Nearly all other functions of the SBA will cease. Suspended programs include: 7(a) Loan Guarantees; 504 Certified Development Loans; Microloans; Surety Bond Guarantees; Procurement Assistance Program; HUBZone; Women-Owned Business Federal Contracting; Service-Disabled Veteran-Owned Small Business Procurement; SCORE; Small Business Investment Companies (SBIC); Small Business Innovation Research (SBIR); PRIME Program; Regional Innovation Clusters; BusinessUSA; and Secondary Market Guarantee.

For more information on specific activities, please see the DOC Contingency Plan.

Public Opinion
According to a survey by Pew Research Center conducted October 9-13:

  • Would you like to see your representative in Congress re-elected in the next election?
    • 2010 Election: 52% Yes, 29% No.
    • 2014 Election: 48% Yes, 38% No*.
    • NET CHANGE = -4% Yes, +9% No.
      *The share of voters saying they do not want their own representative reelected (38%) is as high as it has been in two decades.
  • Which party… Is more extreme in its positions?
    • 55% Republicans; 34% Democrats
    • Margin = Republicans +21
  • Which party… Does a better job dealing with the economy?
    • 44% Republicans; 37% Democrats
    • Margin = Republicans +7
  • Which party… Can better manage the government?
    • 42% Republicans; 39% Democrats
    • Margin = Republicans +3
  • Which party… Does a better job dealing with immigration?
    • 40% Republicans; 39% Democrats
    • Margin = Republicans +1
  • Which party… Is more willing to work with the other party?
    • 32% Republicans; 50% Democrats
    • Margin = Democrats +18
  • Which party… Is more concerned about people like me?
    • 34% Republicans; 54% Democrats
    • Margin = Democrats +20

Recommended Reading

For more information or for special inquiries, please contact Manatt’s Federal Government Affairs Group.

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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