With little bipartisan agreement in Congress, it's hard to know what legislation, if any, stands a chance at passage. To help you understand what is going on and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
After 22 days with no speaker of the House, Congress can get back to legislating again. It has little time to spare. Several matters require lawmakers’ urgent attention. Unfortunately, major disagreements between and within the parties figure to make it hard to reach many compromises.
The first order of business for Congress was avoiding a government shutdown which was achieved with a large bipartisan vote for short-term funding to keep federal agencies open until early next year. Neither party wanted a shutdown this fall. That’s about all they agree on.
In the House, fiscal conservatives led by Speaker Mike Johnson (R-LA) will push for hefty cuts to nondefense spending. (Entitlements like Social Security are off the table.) Senate Democrats are totally opposed to such cuts.
There has been no progress on reaching a compromise on fiscal year 2024 spending. Lack of a deal will prompt spending cuts by default. The debt ceiling bill that averted a default by the Treasury this spring calls for 1% reductions to both defense and nondefense spending if Congress doesn’t pass legislation funding the federal government for all of fiscal year, 2024 by Jan. 1, 2024, although there is a catch. If Congress can pass full-year appropriations before April 30, the spending cuts would be turned off. Speaker Johnson will struggle to get congressional Democrats and the White House to cut spending. Triggering the 1% cuts by refusing to pass full-year bills could be a fallback option, though most Republicans would be reluctant to allow the military to take a hit.
Congress must also consider requests for emergency funding measures from President Biden, who is seeking an extra $105 billion in aid for Ukraine, Israel and Taiwan, plus funds to bolster security on the U.S./Mexico border and $56 billion for relief for areas hit by natural disasters, programs like high-speed internet for the poor and subsidies for short-staffed childcare centers.
House Republicans want the Israel and Ukraine funds voted on separately since many GOP members oppose more money for Kyiv. But in the Senate, Democrats and Republicans alike prefer a package deal and generally favor continuing to arm and supply Ukraine.
Even military aid for Israel could divide Republican ranks since Johnson wants a $14 billion cut from the IRS budget to offset such assistance. Some Republicans won’t want obstacles to providing that aid. A few Democrats, meanwhile, are unhappy about Biden’s support for Israel in its war on Hamas after the October 7 terror attacks.
We think lawmakers will eventually approve money for Ukraine and Israel. But not without a fair amount of back-and-forth first. The world is looking like a more dangerous place these days, but Congress is far from united on a response.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
