Can a Government Shutdown Be Avoided?

In what has become a regular occurrence, Congress once again appears headed toward a fiscal cliff, seemingly unwilling or unable to find a path that avoids calamity and puts the government back on solid ground.

Lawmakers may drive the country over the cliff on Oct. 1, when the federal government’s next fiscal year begins. Lawmakers haven’t passed a budget since Republican George W. Bush was president, and there’s no chance they’ll end the streak this year. The only question — and it’s a doozy — is whether Republicans and Democrats can stop playing political chicken long enough to at least pass a continuing resolution that funds programs on a temporary basis. If not, the government will shut down for the first time since Democrat Bill Clinton was president in the mid-1990s.

Even if that crisis is averted, plunging over the cliff becomes a big risk again four to six weeks later, when lawmakers have to raise the debt ceiling again or push the government into default on its obligations.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Lawmakers from both parties are pessimistic, and given the fractious political climate, it’s no wonder. Right now, about the only thing Congress can agree on is naming a post office after a former member. Anything more contentious than that doesn’t even make it onto the stove, let alone the front burner.

The mood is so grim that Washington seems to expect a government shutdown at some point before the end of 2013.

It wasn’t supposed to be this way. After the last cliff was avoided, both sides held out hope for a megadeal that would include spending cuts, an overhaul of entitlement programs, such as Social Security, Medicare and Medicaid, and tax reform.

Instead, the partisan gulf has grown even wider, and neither side seems willing to take the first step toward building a bridge.

House Republicans say they’ll block any budget package that includes money to implement Obamacare. President Obama, of course, promises to veto a spending plan that doesn’t fund the health care program. But it probably won’t come to that; the Democratic-led Senate won’t pass a bill without health care funding.

Further, the House is threatening to oppose raising the debt limit unless the increase is offset by deep spending cuts or an agreement to reform the tax code. With support for changing the tax code crossing the aisle, one might think an overhaul of the tax system possible, but reform is in the eye of the beholder. There is no chance, for example, that Republicans will agree to do anything to the tax code if Obama and some other Democrats insist that tax changes bring in more revenue.

So lawmakers are approaching a cliff. Again. And neither side is blinking. Again. By the time Congress returns from its August recess after Labor Day, it’ll have fewer than four weeks to pass legislation to fund the government. That’s not enough time to put together a full budget.

At the last moment, though, lawmakers will avoid driving off this cliff, just as they avoided the last one. They’ll adopt yet another continuing resolution to keep things running for a few months, at which point the stare-down will begin anew. A short-term fix for the debt ceiling also seems to be in the cards, again just in time.

Anything more permanent will have to wait until after the 2014 congressional elections, and maybe until a new president takes office in 2017. There’s too much division in Congress at the moment, not only between Democrats and Republicans but also between warring Republican factions. Some GOPers, including Sen. John McCain of Arizona and Sen. Lindsey Graham of South Carolina, seem eager to compromise. But the tea party wing of the party, which seems to have the ear of House Speaker John Boehner (R-OH), equates compromise with surrender.

Former Senate Majority Leader Bob Dole (R-KS) bemoaned the absence of middle ground in a CNN interview marking his 90th birthday in late July. “There were a lot of differences in the days I was in the Senate,” he noted. “But in every case, we were able to work out the differences.” These days, he continued, “compromise has become a bad word.”

When it came to jousting with then-President Clinton, as the Senate GOP leader and as the Republican candidate for president in 1996, Bob Dole never gave up. But he knew there were times when he had to give in. Many of today’s lawmakers, Democrats and Republicans alike, haven’t learned that lesson yet.