Can government avoid a shutdown? Budget chief ‘not optimistic.’

Monitor Breakfast

One bit of good news from 2023 was that the federal government didn’t shut down. Last-minute bipartisan deal-making staved that off.

But in the early days of 2024, the clock is ticking once again. And Shalanda Young, President Joe Biden’s top budget official, isn’t sure that a partial shutdown in two weeks can be prevented.

"I wouldn’t say ‘pessimistic,’ but I’m not optimistic,” Ms. Young, director of the Office of Management and Budget (OMB), said Friday at a Monitor Breakfast for reporters. 

“The rhetoric this week has concerned me that [a shutdown] is the path that House Republicans are headed down,” she added, citing a trip by some 60 GOP representatives to the U.S.-Mexico border led by Speaker Mike Johnson of Louisiana. 

The crisis at the Southern border, with a record influx of migrants, has added fresh urgency to a $106 billion supplemental bill to support not only border security but also Ukraine, Israel, and the Indo-Pacific. The impasse over the border is threatening passage of legislation to fund the federal government. Some government departments are set to shut down Jan. 19, with the rest, including the Department of Defense, running out of funds Feb. 2. 

Multiple wars abroad have added fresh urgency to U.S. funding demands. Ms. Young stressed that the war in Ukraine, almost two years after the Russian invasion, is “dire.” In Israel, which was brutally attacked by Hamas militants from neighboring Gaza Strip on Oct. 7, U.S. funds are also critical to the country’s defense, U.S. officials say. In the Indo-Pacific, China has made ominous comments about a potential takeover of Taiwan. 

The impasse over government funding comes right as the 2024 presidential primaries are kicking off. And while polls show President Biden’s top two challenges with voters are inflation and the border, foreign policy is also rising in voter consciousness, according to a new poll by the Associated Press-NORC Center for Public Affairs Research.  

The C-SPAN recording of the Monitor Breakfast with OMB Director Young can be viewed here. Following are more excerpts from the breakfast, lightly edited for clarity: 

What is the mood like on the White House economic team? And if there is a government shutdown, what's the risk to the economy?

Job numbers have been consistently robust. Inflation has moderated in a way even the [Federal Reserve] recognizes. That doesn't mean we're done with interest rate hikes, but the Fed will make those determinations. The geopolitical space makes me personally nervous. But the indicators we see every month [show] we're on the right path.

Most economists will tell you a shutdown has maybe a 0.01% effect on GDP, and that typically the economy picks up in the next quarter. The one caveat to that statement is governance. We've seen financial institutions, those that are responsible for credit ratings, look at that very closely with regard to the United States’ creditworthiness. And it is concerning that we continue to have a political system that does not show that it works in a smooth way.

U.S. government debt now tops $34 trillion. At what point does carrying so much debt become unsustainable?

We look at more than the sheer number, right? We look at our ability and the cost we pay to service that debt. Clearly with interest rates going up, that always becomes more of a concern.

But from a political standpoint, we've got to get serious here. You cannot fix the debt or the deficit or even get on a path to fixing anything by focusing on the smallest spending amount. All you're doing is hurting people who depend on those discrete programs.

You've heard this president I think more than any other Democratic president be willing to talk about taxes. He's willing to say the corporate tax rate’s too low, that we need to have a minimum tax, that we need to close loopholes for some of our biggest companies. That alone brings in large amounts of revenue that helps fix our debt and deficit problem.

You and Speaker Johnson are both from Louisiana. Can that be helpful in your future dealings?

I did not have the opportunity to know him when I worked in the House. But being from the great state of Louisiana, one finds common ground quickly. So before he sat down during our first time meeting in the Situation Room, I let him know where I was from. I think he took some credit for something I said as [a sign of] a good Louisiana public school education. So you know, that does help forge what is needed in tough situations.