Congress may be getting ready to create a whopper of a fiscal cliff

Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer. Alex Wong/Getty Images

  • Congress has until January 19 to avert a government shutdown.
  • It looks increasingly likely that Congress will simply pass another short-term extension for government funding.
  • A short-term extension runs the risk of pushing the next shutdown debate into other tenuous negotiations.

Once again, Congress is facing down an imminent deadline to prevent a government shutdown. Once again, there is a growing sense that lawmakers may simply punt on that deadline by passing a short-term funding bill.

This time, punting on a larger funding bill could come with much tougher consequences.

Just 10 days before the January 19 deadline to keep the government open, the two parties remain far apart in solving critical issues needed to reach a long-term funding agreement. That raises the possibility of their pursuing a short-term bill to keep the government open and funded.

Analysts believe the most likely scenario is short-term funding legislation known as a continuing resolution, which sets the limits for defence and nondefense spending for the coming year. Chris Krueger, an analyst at Cowen Washington Research Group, said such a scenario had a whiff of familiarity.

“Government funding expires on January 19, i.e. government shutdown,” Kreuger wrote in a note to clients on Tuesday. “This was initially punted from October 1 when … Trump cut a ‘deal’ with Chuck and Nancy to table everything until December 8, which then saw another punt to December 22, and now to January 19th. Here we are, with another short-term CR very possible.”

But a short-term resolution could cause a serious pileup of must-pass legislation down the road.

Kreuger noted that Congress must pass bills to fund the Children’s Health Insurance Program, reauthorize the National Security Agency’s surveillance authority, determine whether to enforce some taxes imposed by the Affordable Care Act, and more.

Perhaps most problematic is that kicking the can down the road runs the risk of pushing up the funding deadline against a deadline to raise the nation’s debt ceiling.

The debt limit was suspended as part of the short-term September funding agreement until December 9. Since then, the Treasury Department has used what are known as “extraordinary measures” to ensure that the US does not default on some of its debt obligations.

According to the Congressional Budget Office, the extraordinary measures will run out in late March or early April. The Bipartisan Policy Center projected the so-called X Date at which the measures would be exhausted is sometime in March.

Not suspending or increasing the debt ceiling by the X Date could result in a technical default for the US government – and cause a global economic disaster.

Greg Valliere, the chief strategist at Horizon Global Investments, said this theme may play out for much of the year’s first quarter.

“With no sign of agreement between the president and Congress on most issues, there’s one logical result for the White House – playing defence, reacting to deadlines as they arise, rather than unveiling new policy initiatives,” Valliere said. “And the deadlines will come fast and furious in the next few weeks – deadlines on the budget and debt ceiling, deadlines on the Iranian nuclear deal, deadlines on the ‘Dreamers.'”