(Bloomberg) — After the partisan passions and heated rhetoric, the disruptions of a government shutdown and displays of dysfunction, Congress did what it could have done weeks ago: voted to fund the government and lift the debt limit.
The passage last night by wide margins — an 81-18 vote in the Democratic-led Senate, followed by a 285-144 vote in the Republican-controlled House — allows the U.S. to avoid default and ends the shutdown that began Oct. 1 and has taken $24 billion out of the U.S. economy.
President Barack Obama signed the bill just after midnight, according to a White House statement. The measure puts government workers back on the job starting today and permits the U.S. to pay its debts, benefits and salaries.
“We’ll begin reopening our government immediately and we can begin to lift this cloud of uncertainty and unease from our businesses and from the American people,” Obama said last night at the White House after the Senate voted.
Lawmakers didn’t show they’re any closer to resolving the underlying issues of spending priorities and deficit-reduction measures, particularly in the House where a shrinking political middle makes compromise elusive as the latest events show.
The focus now shifts to a new series of deadlines — the first for budget negotiations with a Dec. 13 target — that set up more rounds of political combat over taxes and spending on programs including Social Security and Medicare. The deal funds the government at Republican-backed spending levels through Jan. 15, 2014, and suspends the debt limit through Feb. 7.
Health law
Tea Party-allied Republicans, such as Texas Senator Ted Cruz, said they would find ways to keep up the fight against Obama’s health care law.
“The Republican Party has learned a lesson here, and I think you’re going to see a more mainstream Republican Party,” Senator Charles Schumer, a New York Democrat, said Thursday on MSNBC’s “Morning Joe” program. “I don’t think we’ll have the same kind of brinkmanship on Jan. 15 and Feb. 7.”
The votes conclude a four-week fiscal standoff that began with Republicans demanding defunding the Affordable Care Act, and objecting to raising the debt limit and funding the government without policy conditions.
Wrong fight
They achieved almost none of those goals. Obama and the uncharacteristically unified congressional Democrats stared down Republicans, particularly those allied with the Tea Party movement, who had sought to use the shutdown and debt ceiling as leverage even as more experienced lawmakers realized they didn’t have the votes.
Judd Gregg, a former New Hampshire Republican senator and veteran of Obama’s first-term fiscal commission, said members of his party took on the wrong fight when they made it about Obama’s health care law. Gregg is now chief executive officer of the Securities Industry and Financial Markets Association.
“It was an exercise in dysfunctional government,” Gregg says. “It was a loser position from the beginning because there was no way in divided government you’re ever going to repeal ‘Obamacare.’ We should have been debating as Republicans how we fix our fiscal house.”
The practice of governing by crisis has become so established in Washington that financial markets weren’t disturbed by the impasse, correctly anticipating a deal would come at the last moment as happened in a similar standoff two years ago.
Offices open
Federal agencies were instructed to begin opening offices today in a “prompt and orderly manner” and furloughed employees were told to return to work, according to a memo from White House budget office Director Sylvia Burwell.
“We will work closely with departments and agencies to make the transition back to full operating status as smooth as possible,” Burwell said in the memo released early Thursday.
Still, the 16-day shutdown hasn’t been cost-free. It has taken a toll on workers who lost paychecks — furloughed employees will receive back pay — and on the U.S. economy. Standard & Poor’s said yesterday the shutdown has shaved at least 0.6 percent from fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy.
“Millions suffered,” Schumer said. “Millions didn’t get paychecks. The economy was dragged down and confidence and faith in United States credit and in the United States around the world was shaken.”
Macroeconomic Advisers LLC said in a report prepared this week for the Peter G. Peterson Foundation that the budget fights in Washington have lowered U.S. economic growth by about 0.3 percentage points a year since 2009. The fiscal standoff added more than a half-point to this year’s unemployment rate, or the equivalent of about 900,000 jobs, the report said.
Normal pace
It may be weeks or even months before the government resumes issuing loans, payments and contracts at a normal pace. The budget impasse also raised doubts that will linger about U.S. reliability among major creditor nations such as China and frustrated many Americans.
“The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid. The Nevada Democrat negotiated the agreement with his Republican counterpart, Mitch McConnell of Kentucky, after House Speaker John Boehner, an Ohio Republican, was unable to come to terms within his caucus.
“It would appear as though we’re kicking the can down the road one more time,” says Representative Jim Bridenstine, an Oklahoma Republican.
2014 election
The reaction of independents may determine whether Republicans have a chance to make inroads in the Senate in the 2014 election. Republicans need a net gain of six seats to win the majority in the 100-member chamber. Democrats are defending seven seats in states Republican Mitt Romney won in the 2012 presidential election.
“For now, the default debate, coupled with the shutdown of the government, has been to the detriment of Senate Republicans,” says Jennifer Duffy, senior editor of the Washington-based Cook Political Report, which tracks congressional contests. The Republicans’ “path to the majority was narrow before the shutdown and has gotten considerably more narrow since.”
While public opinion polling shows Americans disproportionately blame Republicans for their handling of the debt fight, members have more than a year before they have to face voters again in midterm elections.
The Tea Party is less popular than ever, with many Republicans viewing the movement negatively, according to a poll released yesterday by the Pew Research Center for the People and the Press in Washington. Overall, 49% of the public has an unfavorable opinion of the Tea Party, up from 45% in June, while 30 have a favorable opinion, down from 37% two months ago.
Those numbers may be misleading, as the Tea Party movement is most effective as a political force in Republican-dominated Congressional districts where incumbents look for a primary challenge.
