U.S. Congressional Update

As of today, the U.S. government has been shut down for 23 days – the second longest shutdown in American history.  Both parties seem to believe that the current situation works to their advantage, and there is no clear off-ramp.

How did we get here, and how is this likely to play out?

As noted in last month’s newsletter, the United States Congress is responsible for funding federal agencies and programs through a series of 12 appropriations bills.  In a perfect world, these would be passed by both the House of Representatives and the Senate and signed into law before the start of the federal fiscal year, which begins on October 1.

However, the increasingly polarized and dysfunctional Congress has routinely failed to pass appropriations bills in a timely fashion. As a result, they have resorted to stopgap measures known as a “continuing resolution”, or “CR”, to keep the government funded until appropriations legislation can be hammered out. In recent years, CRs have often been extended to cover the entire fiscal year for at least some federal agencies and programs.

True to form, the current Congress failed to pass any of the fiscal year 2026 appropriations bills prior to the end of September, so the Republican majority proposed a CR that would last until November 21. This bill passed the House on a largely party-line vote, but hit a roadblock in the Senate, where 60 votes are needed to overcome a filibuster and pass most legislation. On the day before the shutdown, three Senate Democrats voted for the CR, while one Republican voted no, meaning that the bill received only 55 yes votes – five short of the number required for passage. Contrary to the predictions of many Republicans – who believed Democrats would “cave” in short order – subsequent Senate votes on the CR have yielded the exact same result.

The key Democratic demand in this standoff is an extension of subsidies that help people purchase health insurance under the Affordable Care Act, commonly known as “Obamacare”. If the subsides are not extended, millions of Americans will lose their health insurance, and millions more will pay dramatically higher monthly premiums.   Interestingly, a significant proportion of the people that would be affected by a lapse in subsidies are Republicans that live in “red” states.

Some Republicans have stated an openness to work on extending the subsidies, but the position of Republican leadership is that they will not negotiate on health care issues until Senate Democrats vote to pass the CR and reopen the government. For their part, Democrats have said they won’t accept a promise to work on this issue later – they are insisting that it be dealt with as part of a package along with the CR.

Polling indicates that more Americans blame Republicans for the current impasse, but both sides believe they are in a good position to “win”. The Trump Administration has taken some steps to pressure Democrats, including cutting funding for infrastructure projects in “blue” states and firing some of the federal workers that have been furloughed (a move Democrats say is illegal and will be challenged in court). At the same time, some other actions the President has taken – including using unspent defense funds to pay members of the military – takes some heat off the Democrats. For their part, Democrats believe Republicans will feel increasing pressure to negotiate after the 2026 Obamacare enrollment period opens on November 1, when many average Americans will be forced to directly confront massive increases in the cost of their healthcare.

There are some rumblings that Senate Democrats, recognizing that they are unlikely to achieve their near-term legislative goal of extending the Obamacare, may vote to reopen the government after November 1, by which time it will be abundantly clear that Republicans “own” the increase in health care costs.  It remains to be seen if Democrats would be satisfied with a policy loss but what would be seen by some as a political victory.

The longest shutdown in U.S. history was 35 days during Trump’s first term. Given the current impasse, we think there’s a decent chance the current shutdown will set the record.