The looming specter of a government shutdown hangs heavy over Washington as the Christmas holiday approaches. Congress returned to work this week with the urgent task of averting a funding crisis, as the current spending bill expires on December 20th. Despite ongoing negotiations, the House and Senate have yet to reach a consensus on a spending package, raising concerns about the potential disruption of essential government services. The primary objective at this point is not to enact a comprehensive budget for the year, but rather to secure a short-term continuing resolution (CR) that would extend funding into March 2025, mirroring a similar approach taken last year. This temporary fix would allow the incoming Congress to grapple with the more complex issues surrounding long-term budget allocation.
The current predicament stems from the ongoing debate over government spending levels. Earlier this year, Congress narrowly avoided a shutdown by passing a continuing resolution that funded the government through December 20th. This CR largely maintained funding levels from the 2024 fiscal year, with some adjustments for specific programs. While this provided temporary relief, it also set the stage for the current impasse. With a new Congress poised to take office, the current lame-duck session is unlikely to engage in significant budgetary reforms, preferring instead to defer these decisions through another short-term CR.
One of the most contentious aspects of the current spending debate revolves around funding for the Internal Revenue Service (IRS). The Inflation Reduction Act (IRA) of 2022 allocated $80 billion in additional funding to the IRS over ten years, primarily for enhanced enforcement, technology upgrades, and improved customer service. However, subsequent legislative actions have chipped away at this funding. A debt ceiling agreement clawed back over $1 billion, and a further $20 billion was rescinded from the IRA’s tax enforcement budget. Because any continuing resolution would likely maintain 2024 funding levels, including these cuts, the IRS faces another potential $20 billion reduction in funding.
Treasury officials have warned that such drastic cuts would significantly impact the agency’s ability to collect taxes, potentially increasing the deficit by $140 billion over the next decade. They argue that decreased enforcement would primarily benefit high-income taxpayers, who have seen a decline in audit rates in recent years, while audits on lower-income taxpayers have increased. Furthermore, cuts to IRS funding would not only hamper enforcement efforts but also undermine crucial taxpayer services. The Treasury Department projects a significant drop in the IRS’s ability to answer taxpayer calls and anticipates a substantial increase in call wait times.
Despite these concerns, some segments of the public and political spectrum advocate for reduced IRS funding. A recent poll conducted on X (formerly Twitter) showed a significant portion of respondents favoring either the elimination or reduction of IRS funding. However, this poll might not accurately reflect public sentiment due to its limited sample size and potential biases inherent in online platforms. The IRS maintains that the additional funding from the IRA has been instrumental in improving taxpayer services, citing improvements in call response times and the development of initiatives like Direct File, a free online tax filing program. While some have criticized Direct File, the concept of a free, accessible tax filing platform has garnered support from various quarters, including some associated with the previous administration’s efficiency initiatives.
The current situation echoes the political brinkmanship that preceded a similar government shutdown threat last year. Despite internal divisions, Congress ultimately averted a shutdown by passing a continuing resolution. A similar outcome is expected in the coming days, as the political and economic costs of a shutdown are substantial. However, if a compromise cannot be reached, non-essential government functions will be suspended, potentially impacting a wide range of services and programs.
The most recent hurdle in the negotiations involves demands from some House Democrats and Republicans for additional farm aid to be included in the spending bill. Agricultural groups have highlighted the devastating impact of recent hurricanes and the broader economic challenges facing the agricultural sector, urging Congress to provide financial relief. While there is a recognized need for agricultural assistance, the primary sticking point remains finding a consensus on how to offset the cost of this aid. The House Republicans have stated their opposition to any continuing resolution that does not include farm aid provisions. This demand adds yet another layer of complexity to the already challenging negotiations, further jeopardizing the chances of a timely resolution.
Further complicating matters is a procedural hurdle that could hinder last-minute legislative maneuvering. A rule adopted last year requires that the text of any bill or resolution be released at least 72 hours before a vote, limiting the House’s ability to push through a last-minute deal. This procedural requirement necessitates the release of the CR text imminently to allow for a vote before the December 20th deadline..The combination of these factors creates a high-stakes political drama with significant implications for the functioning of the government and the delivery of essential services.
