The deal between Democrats and Republicans to raise the government’s debt limit did not end the warfare over the federal budget. It was merely a temporary ceasefire.
The conventional wisdom in Washington (especially inside the administration) holds that the next skirmish will come around Thanksgiving, when the so-called Super Congress of six Republicans and six Democrats have a deadline to make their recommendations about reducing the expected 10-year deficit by another $1.5 trillion.
But the next budget confrontation in Washington could come much sooner. We could be just six weeks away from another threat to shut down the federal government. That’s Oct. 1, when the new fiscal year begins.
If there is a fight over the budget in September and October, the markets and the economy could be facing a lot more uncertainty.
While the debt-ceiling agreement did produce a broad outline of how much the government would spend in the next fiscal year, it did not settle any of the details about exactly which line items would be cut, which would be held constant and which would get increases. And, contrary to what most people inside the Beltway believe, the level of spending agreed to in the debt-ceiling agreement is not binding.
Remember, House Republicans have approved a budget that calls for spending about $25 billion less than in the debt-ceiling deal. Republicans could try to extract those larger spending cuts — and more — by threatening to open the new fiscal year with a government shutdown.
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