Representatives in the U.S. House of Representatives have lost the final vote on the rules of the defense appropriations bill.
House Speaker Kevin McCarthy is struggling to unite his Republican colleagues around a temporary funding bill aimed at avoiding a federal government shutdown at the end of the month. Despite ongoing negotiations, McCarthy is running out of options as the deadline approaches. Even if he manages to pass a conservative spending plan in the House, it will likely be rejected by the Senate, where Democrats hold the majority.
McCarthy’s leadership is in question, especially after a group of Republican lawmakers from the House Freedom Caucus joined with Democrats to block a usually no-brainer defense bill. McCarthy is trying to pass a stopgap bill that would cut many government services by 8 percent while sparing defense and veterans’ accounts. However, the Conservatives want these reductions to be in effect for a full year.
Amid this impasse, bipartisan groups in the House and Senate are exploring alternative solutions to fund the government. Also at stake is President Joe Biden’s demand for an additional $24 billion in aid for Ukraine. The situation remains tense as lawmakers scramble to find a solution before the government runs out of money. money.
When things get tight in Washington, it tends to temporarily hurt stocks (politically, it’s not good to see the government paralyzed). However, with deficits rising, rates also likely to remain high, increasing interest costs on those deficits, and the risk of slowing growth as the Fed seeks to stop inflation (this i.e. tax revenue), all of which could lead to further digging in by conservative, big-spending hardliners. .
While the majority of Republicans in the House have problems with some GOP members wanting even more restrictions on spending, while Democrats don’t want the current proposal, that poses problems for McCarthy.