House Republicans elect a new speaker as budget deadline looms

A government shutdown could impact many programs that cities rely on

After three weeks of unprecedented chaos, the U.S. House of Representatives has a new speaker: Rep. Mike Johnson from Louisiana. Johnson succeeds California Representative Kevin McCarthy, who was ousted from the position by a narrow vote.

Since the speaker pro tempore had limited powers, business ground to a halt in Washington. Now that the House is back in session, lawmakers have a long to-do list. Top of the list? Passing a budget deal.

If legislators fail to reach an agreement, spending authority for most federal agencies will expire. All but the most essential services, such as air traffic control and customs, would shut down. This could significantly impact many programs that cities rely on, including social safety net programs, long-term disaster recovery, infrastructure projects, and environmental reviews.

Even state agencies and nonprofits could see service shutdowns if they have positions or services funded by federal dollars. During the 2019 federal shutdown, cities either had to halt federally funded services or fund the services themselves.

Johnson eyes stop-gap bill as Democrats and Republicans remain split on key issues

In September, Congress passed a short-term funding bill that is set to expire on Nov. 17. Johnson has indicated that he plans to pass a stop-gap bill that will last through April while House Republicans work out a longer-term solution. It remains unclear what funding level he will choose.

Johnson wants to "build conference consensus regarding 2025 budget levels and pass a budget resolution." When McCarthy built consensus on a top-line budget number, it was below the amount agreed to by the White House. If House Republicans adopt this strategy of letting the conference develop spending levels, it could lead to a fiscal standoff — with the House on one side and the Senate and the White House on the other. 

On Tuesday, House Republicans announced an aid package for Israel that slashes funding for the IRS. The move puts them at odds with President Biden, who requested a joint aid package for Israel, Ukraine, and border security. Congress agreed to additional IRS funding as part of the Inflation Reduction Act, but some lawmakers have tried to claw it back.

The White House and Senate Democrats called the standalone bill a non-starter. House Republicans meanwhile called for “accountability” on money sent to Ukraine.

House Republicans are also trying to block funding for California’s high-speed rail project. Biden is a big advocate for passenger rail. Federal support for passenger rail was a key part of the Bipartisan Infrastructure Act.

It’s widely believed that current House Republican spending measures have no chance of succeeding in the long term.

According to the latest Goldman Sachs analysis, a government shutdown in the short term is “much less likely” than it was previously. However, there is “some risk” in early 2024, especially if Congress continues to rely on short-term extensions.