Both the House and Senate are due to get back to work this week after their Thanksgiving break, and lawmakers have a lot on their plates.
A divided Washington put off the threat of a partial government shutdown until mid-January by enacting a short-term spending bill in mid-November, but the measure didn’t address President Joe Biden’s $106 billion funding request that includes wartime aid for Israel and Ukraine.
House Republicans voted Friday in a secret ballot against keeping Rep. Jim Jordan as their nominee for speaker, and they planned to determine a new nominee next week.
The Ohio congressman had been facing resistance in his bid to become speaker, with the number of fellow Republicans voting against him rising to 25 in a third round of voting Friday on the House floor, up from 22 in a prior ballot.
House GOP lawmakers were expected to meet Monday evening for a new forum for speaker candidates. Rep. Kevin Hern of Oklahoma said in a post on X that he was running for the job, and Rep. Jack Bergman of Michigan has indicated he’ll seek the post as well.
The GOP opposition to Jordan stemmed from a range of concerns, including that his speakership could lead to cuts in defense ITA
spending, as well as the view that he didn’t provide enough support for the speaker bid of House Majority Leader Steve Scalise, a Louisiana Republican. Jordan’s Republican opponents also said they’ve faced death threats for their stance, with Rep. Drew Ferguson of Georgia saying Thursday that the House GOP “does not need a bully as the Speaker.”
Analysts have been warning that the process of picking a new speaker is preventing the Republican-run House from addressing crucial matters, such as supporting Israel and passing a budget to avoid a government shutdown next month that could rattle markets. It has been 17 days since the historic ouster of former Speaker Kevin McCarthy, a California Republican.
With the House looking rudderless for more than two weeks, the chamber’s temporary speaker, GOP Rep. Patrick McHenry of North Carolina, has faced calls to take on the job more permanently. But a measure that would have McHenry serve in the post until January stalled on Thursday afternoon due to objections from a number of Republicans, even as Jordan offered his support for it.
House Republicans voted Friday in a secret ballot against keeping Rep. Jim Jordan as their nominee for speaker, and they planned to determine a new nominee next week.
The Ohio congressman had been facing resistance in his bid to become speaker, with the number of fellow Republicans voting against him rising to 25 in a third round of voting Friday on the House floor, up from 22 in a prior ballot.
Rep. Jim Jordan continued to face resistance Friday in his bid to become the next speaker of the U.S. House of Representatives, with the number of fellow Republicans voting against the Ohio congressman rising to 25 in a third ballot, up from 22 in the prior ballot.
House GOP lawmakers were slated to hold a meeting around 1 p.m. Eastern Friday, and there were expectations they would vote on whether Jordan should continue to be their nominee for speaker.
Jordan hasn’t sounded like he’s close to throwing in the towel, as he indicated at a news conference before the third round of voting that he planned to keep pushing.
“There’s been multiple rounds of votes for speaker before,” he said during the news conference, referring to how former Speaker Kevin McCarthy needed 15 ballots to secure the job in January.
“Our plan this weekend is to get a speaker elected to the House of Representatives as soon as possible so we can help the American people,” he also said.
Jordan needs a simple majority of House lawmakers to back him in order to become speaker of the narrowly divided chamber, which has 221 Republicans and 212 Democrats, with two vacancies. That would have been 215 votes in the third ballot as there were some absences Friday.
All 210 Democrats present Friday voted for their nominee, House Minority Leader Hakeem Jeffries, while 194 Republicans backed Jordan and 25 GOP lawmakers supported other candidates.
Analysts have been warning that the process of picking a new speaker is preventing the Republican-run House from addressing crucial matters, such as supporting Israel and passing a budget to avoid a government shutdown next month that could rattle markets.
With the House looking rudderless for more than two weeks, the chamber’s temporary speaker, GOP Rep. Patrick McHenry of North Carolina, has drawn calls to take on the job more permanently. But a measure that would have McHenry serve in the post until January stalled on Thursday afternoon due to objections from a number of Republicans, even as Jordan offered his support for it.
Given the GOP opposition, the McHenry option would require some Democratic support. Jeffries, a New York Democrat, has continued to signal openness to it.
“Conversations hopefully will intensify today, perhaps continue throughout the weekend, and get us to a place where we can reopen the House no later than Monday of next week,” Jeffries told reporters on Friday after the third ballot.
The GOP opposition to Jordan stems from a range of concerns, including that his speakership could lead to cuts in defense ITA
spending, as well as the view that he didn’t provide enough support for the speaker bid of House Majority Leader Steve Scalise. Jordan’s Republican opponents also have said they’ve faced death threats for their stance, with Rep. Drew Ferguson of Georgia saying Thursday that the House GOP “does not need a bully as the Speaker.”
Republican Rep. Matt Gaetz of Florida, who led the drive to oust McCarthy from his post more than two weeks ago, said he and the other GOP lawmakers who opposed McCarthy have made an offer to their colleagues who aren’t supporting Jordan, in an effort to get them to switch their votes.
“The eight of us have said that we are willing to accept censure, sanction, suspension, removal from the Republican conference,” Gaetz told reporters after the third ballot, adding that the group will continue to vote with Republicans.
Another Jordan supporter, GOP Rep. Bob Good of Virginia, said the Ohioan should stick with his bid, noting McCarthy went through many rounds.
“We believe if we keep voting Jim Jordan will be elected speaker,” Good told reporters.
Rep. Jim Jordan made progress Monday in his push to become the next speaker of the House of Representatives, winning endorsements from some fellow Republicans who just last week had refused to back him.
The narrowly divided chamber of Congress is expected to vote around noon Eastern Tuesday to select a speaker, with the move coming after former Speaker Kevin McCarthy was ousted two weeks ago and after No. 2 House Republican Steve Scalise ended his bid for the post last week.
GOP Rep. Ann Wagner of Missouri, who previously said a Jordan speakership was a non-starter for her, switched her stance on Monday. She said in a post on X that her colleague from Ohio “has allayed my concerns about keeping the government open with conservative funding, the need for strong border security, our need for consistent international support in times of war and unrest … as well as the need for stronger protections against the scourge of human trafficking and child exploitation.”
Similarly, GOP Rep. Mike Rogers of Alabama, who chairs the House Armed Services Committee, announced in a post on X that he was backing Jordan after saying last week that there was nothing that Jordan could do to win his support. Rogers pointed to an accord on an annual Pentagon bill, the National Defense Authorization Act, saying he and Jordan had “agreed on the need for Congress to pass a strong NDAA, appropriations to fund our government’s vital functions, and other important legislation like the Farm Bill.”
Republican Rep. Vern Buchanan of Florida offered his support for Jordan as well on Monday, though he noted that he’s “deeply frustrated by the way this process has played out.” Another endorsement came from GOP Rep. Ken Calvert of California, who chairs the House Appropriations Committee’s defense subpanel.
Jordan — who has been endorsed by former President Donald Trump — sent a letter to his colleagues in which he called for coming together after a chaotic two weeks, saying: “It is time we unite to get back to work on behalf of the American people.” The congressman, a co-founder of the hardline House Freedom Caucus and chairman of the House Judiciary Committee, also told CNN that he was confident about Tuesday’s vote, saying: “I feel good about it.”
Analysts have been warning that the process of finding a replacement for McCarthy is preventing the House from addressing crucial matters, such as avoiding a government shutdown next month and supporting Israel in its war against Hamas.
House Republicans made Jordan their nominee for speaker on Friday, but he drew just 124 votes while 81 lawmakers backed another candidate for speaker, GOP Rep. Austin Scott of Georgia. In another round of voting on Friday, Jordan still had 55 colleagues voting against him, but he now appears to be flipping some of them to his side.
One betting market, Smarkets, was giving Jordan a 33% chance of becoming speaker.
Spending cuts and shutdown coming?
Having Jordan as speaker could mean a 1% cut in defense ITA
and non-defense spending, noted Philip Wallach, senior fellow at the American Enterprise Institute, a conservative think tank. That’s because this year’s debt-limit deal includes a provision that calls for such reductions if there aren’t bipartisan agreements on a dozen funding bills before Jan. 1 and instead a reliance on short-term measures known as continuing resolutions, or CRs.
“It is now clear,” Wallach said during an AEI event on Monday, that Jordan’s “plan is to have us live off continuing resolutions and implement this 1% cut.”
“That’s a concrete thing where he could say, ‘Well, we’re moving in the right direction. We’ve taken a hard stand,’” the AEI expert added.
The CEO of one financial advisory firm also sees standoffs in the future.
“We expect the next U.S. speaker will be less inclined to make deals than McCarthy; in many ways it makes more sense for them, politically, not to be a deal-maker in the current environment,” said deVere Group’s Nigel Green in a statement.
“We believe that a U.S. government shutdown is now more likely with a new speaker of the House, and this has the potential to create a domino effect in global financial markets SPX.
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BTIG analysts Isaac Boltansky and Isabel Bandoroff said the speaker drama suggests that next year’s election will also be full of twists and turns.
“We have followed every twist and turn of the speakership race, and there is only one takeaway we can share with absolute certainty: This confirms that the 2024 election cycle will be exhausting, volatile, and just downright weird from beginning to end,” they wrote in a note.
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closed higher Monday, as investors looked ahead to earnings season and unwound the flight-to-safety trades seen last week on fears the Israel-Hamas war could escalate into a wider conflict.
U.S. lawmakers are due to get back to work Tuesday on Capitol Hill, and there are growing expectations that one fruit of their labors will be a partial government shutdown.
“My guess is that we will have a lot of screaming and shouting, and we’ll end up shutting down the government, and a lot of people will be inconvenienced or hurt as a result of doing that, but we’ll do it,” said Republican Sen. Mitt Romney of Utah in an interview with a TV station in his home state.
“And by the way, we’ll shut down government, and then we’ll open it. It’s not like that means that we win. No, no. We just shut it down to show that we’re fighting and making noise.”
Investors should view the shutdown as largely noise, according to a number of analysts in Washington, D.C., who track lawmakers’ moves for Wall Street.
“The stakes here are significantly lower than they were back in June, when we were facing default,” said Ed Mills, Washington policy analyst for Raymond James, referring to lawmakers’ efforts to reach a deal on raising the U.S. debt ceiling in order to avoid a market-shaking default.
“For the most part, this is a 1 or 2 on a scale of 1 to 10 in terms of concern,” Mills told MarketWatch, adding that a U.S. default, on the other hand, would have registered as a 10 on that scale.
There have been six government shutdowns since 1978 that lasted five days or more, and the S&P 500 stock index SPX
gained in the four most recent shutdowns. Brian Gardner, chief Washington policy strategist at Stifel, emphasized that history in a note to clients.
“Headlines regarding a potential budget impasse will grow and there could be a whiff of panic in the air, but investors should take all of this in stride. Markets tend to ignore the impact of a government shutdown,” Gardner wrote, as he offered the chart shown below.
There have been six shutdowns since 1978 that lasted five days or more. Here’s how stocks handled them.
Stifel’s Gardner said that while past shutdowns suggest that investors should not panic, there still is some damage.
“There will be extensive media coverage of closed entrances at national parks and other government facilities. Government salaries will not be paid on time which is, certainly, a hardship for some families,” he wrote. At the same time, he emphasized that “much of the country will operate as usual,” including the military ITA
and air traffic controllers — and missed paychecks will come through once the shutdown ends.
“From a market perspective, the biggest concern relating to a government shutdown is that it could delay official government data reports at a pivotal time for the Federal Reserve,” said BTIG’s Issac Boltansky and Isabel Bandoroff in a note.
The BTIG analysts said they expect a shutdown will occur but it should be a “nonevent for markets” overall, because it “would have no impact on debt payments and any missed activity would be settled on the other side of reopening.”
There could be a greater-than-anticipated impact on stocks DJIA
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if the shutdown lasts for a longer time than expected, and if the deal to end the shutdown features unexpectedly large cuts to spending along with significant repeals of Democrats’ Inflation Reduction Act, according to Mills, the Raymond James analyst.
“The most likely scenario is that it’s days, not weeks,” he said, regarding the length of any shutdown. He also noted it could hit consumer confidence and disrupt the initial-public-offering process for some companies.
What’s likely to happen on Capitol Hill
Only one chamber of Congress is returning to Washington on Tuesday, the day following Labor Day, after an August recess — the Senate. The House of Representatives is slated to resume its work on Capitol Hill a week later, on Sept. 12.
Ahead of their returns, the Biden White House’s budget office has pushed for passage of a short-term funding measure to avoid a partial federal government shutdown on Oct. 1, when the government’s 2024 fiscal year starts.
Such a measure is known as a continuing resolution, or CR, and they’re often used as the House and Senate work to agree on a dozen appropriations bills that would fund government operations for a full fiscal year.
The debt-ceiling deal negotiated between House Speaker Kevin McCarthy and President Joe Biden set spending levels over the next two years, keeping nonmilitary spending for 2024 the same as 2023 levels. But House Republicans have adopted spending targets for the coming fiscal year at levels below the McCarthy-Biden agreement.
“The thing that Kevin McCarthy is trying to tell his caucus is that we probably need to have a short-term CR, so that the House can finish its work on appropriations bills and establish the best negotiating position,” Mills said.
The House Freedom Caucus, a hardline GOP group known for causing headaches for the chamber’s leaders, has voiced concerns. It said in an Aug. 21 statement that its members want to rein in outlays and will oppose any spending measure that doesn’t include a House-passed bill focused on security at the U.S. southern border. In addition, the group said any spending measure must address the “unprecedented weaponization” of the Justice Department and the FBI, as well as end “woke policies in the Pentagon.”
The most likely path forward is the GOP-run House passes a short-term funding measure that incorporates House Freedom Caucus goals, and then there’s a showdown with the Democratic-controlled Senate over those policy riders, with a short-lived shutdown potentially taking place, Mills said.
The Raymond James analyst said the most likely deal is a budget that’s in line with what was negotiated as part of the debt-limit deal. He also expects supplemental measures that provide relief for areas hit by Hurricane Idalia and the Maui wildfires, as well as some funding for Ukraine as it continues its fight against Russia’s invasion.
“For investors, they have seen McCarthy go up to the brink, go through a tough situation and be able to pull a rabbit out of it,” Mills said, referring to his January battle to become House speaker and the spring’s debt-limit talks. And they’ve “gone through government shutdowns in the past, mostly with very minimal market reaction,” he added.
