US government shutdown looms as House Republicans reject funding bill

Hardline Republicans in the U.S. House of Representatives on Friday rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning Sunday.

The House rejected in a 232-198 vote a measure to fund the government for 30 days to give lawmakers more time to negotiate. That bill would have cut spending and impose immigration and border security restrictions, Republican priorities that have little chance of passing the Democratic-majority Senate.

The Senate, meanwhile, on a broad bipartisan basis has been advancing a similar bill, known as a continuing resolution or CR, to fund the government through Nov. 17.

"It's not the end yet, I've got other ideas," Republican House Speaker Kevin McCarthy told reporters following the defeat on a bill he had backed.

The National Park Service will close, the Securities and Exchange Commission will suspend most of its regulatory activities, and disrupt pay to up to 4 million federal workers beginning at 12:01 a.m. ET on Sunday (0401 GMT on Sunday) if Congress does not pass a spending package that can be signed into law by President Joe Biden before then.

U.S. Treasury Secretary Janet Yellen said on Friday that a government shutdown would "undermine" U.S. economic progress by idling key programs for small businesses and children, and could delay major infrastructure improvements.

The shutdown would be the fourth in a decade and comes just four months after a similar standoff brought the federal government within days of defaulting on its $31 trillion-plus in debt. The repeated brinkmanship has raised worries on Wall Street, where the Moody's ratings agency has warned it could damage the nation's creditworthiness.

McCarthy sought to use the CR's border provisions to pressure at least nine hardline holdouts into backing the measure, and stepping back from the brink of a shutdown.

"Every member will have to go on record of where they stand: Are they willing to secure the border, or do they side with President Biden on an open border and vote against a measure to keep government open?" McCarthy told reporters.

Hardliners who oppose the measure want Congress to press on instead with full-scale spending legislation for fiscal 2024.

Meanwhile, Democrats warned that the Republican CR would mean a 30% spending cut in benefits for poor women and children and a 57% cut in resources for battling wildfires. It would increase spending for defense and homeland security.

McCarthy succeeded in passing three of four bills late on Thursday that would fund four federal agencies. The bills were written to accommodate hardline conservative demands and stand no chance of passing the Democratic-controlled Senate, though even if they became law, they would not avert a partial shutdown because they do not fund the full government.

McCarthy and Biden, a Democrat, in June agreed to a deal that would have funded the government with discretionary spending at $1.59 trillion in fiscal 2024, but House Republican hardliners are demanding another $120 billion in cuts plus tougher legislation that would stop the flow of immigrants at the U.S. border with Mexico.

A shutdown would delay vital economic data releases, which could trigger financial market volatility, and delay the date that retirees learn how much their Social Security payments will rise next year. Social Security payments themselves would continue.

The current fight focuses on a relatively small slice of the $6.4 trillion U.S. budget for this fiscal year. Lawmakers are not considering cuts to popular benefit programs such as Social Security and Medicare.

Several hardliners have threatened to oust McCarthy from his leadership role if he passes a spending bill that requires any Democratic votes to pass, an outcome almost guaranteed given that any successful House bill must also pass the Senate, controlled by Democrats 51-49.

Former President Donald Trump, Biden's likely election opponent in 2024, has taken to social media to push his congressional allies toward a shutdown.

House Republicans expressed annoyance late Thursday with their hardline colleagues, who have stymied the process at almost every turn.

"They can't set a fire, call the fire department, turn off their water supply and then blame them for not putting out the fire," Representative Dan Crenshaw told Reuters. "That's kind of what's happening right now."

Representative Mike Garcia, a member of the House Appropriations Committee, described himself as "frustrated."

"We don't have a good position going into what would be a negotiation with the Senate," he told Reuters on Thursday.

Representative Richard Neal, the ranking Democrat on the tax-writing House Ways and Means Committee, described the appropriations process as “the worst in the 35 years I've been here.”

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