Overview
Shutdown Standoff: As readers of this newsletter know, the federal government has shut down after Congress failed to enact a funding bill ahead of the September 30 deadline. Neither the House nor the Senate are expected to vote this weekend, so anticipated early votes next week will be a key test of whether there is genuine interest in striking a deal. In the meantime, there are many moving parts and a mix of incentives pushing and pulling members. At this point, how long the shutdown will last is anyone's guess.
Democrats face a challenging balancing act—their base is pressing for a concrete concession from Republicans, most notably an extension of Affordable Care Act (ACA) subsidies, in exchange for reopening the government, viewing this as an opportunity to spotlight health care issues. At the same time, Democrats are concerned about the Office of Management and Budget's (OMB) expanded discretion to reorganize the federal bureaucracy during a shutdown (more on that later) and the impact of further personnel and funding cuts.
Within the Republican caucus, most are determined to hold the line, bolstered by their unified control in Washington and OMB's expanded shutdown authority. Still, some Republicans appear open to considering discussions on an extension of the ACA subsidies due to potential health care premium hikes and the resulting political fallout. While Republican leadership has signaled a willingness to have further ACA extension discussions, they maintain that discussions will only occur after the government reopens.
Though both parties appear publicly dug into their respective positions, some members have opened the door to informal bipartisan talks. Senators Angus King (D-ME), Catherine Cortez-Masto (D-NV), and John Fetterman (D-PA) broke ranks with Democrats this week by voting in favor of the clean CR, signaling interest in a bipartisan path forward. While any conversations remain informal and preliminary, the most likely scenario is Democratic leadership agreeing to ease their stance in return for a clear commitment from Republicans to negotiate on ACA subsidies. Such an agreement would be paired with passage of a clean, short-term CR.
OMB Puts on the Pressure: OMB Director Russ Vought is using the shutdown as an opportunity to advance the administration's agenda. Using the tools at its disposal, OMB has increased pressure on Democrats by freezing funding for 233 clean energy projects in predominantly blue states and halting major infrastructure funding in New York—directly targeting Senate Minority Leader Chuck Schumer (D‑NY) and House Minority Leader Hakeem Jeffries (D‑NY).
Director Vought has also signaled a more aggressive step: issuing "reduction in force" (RIF) notices to permanently lay off federal employees—a departure from the past practice of temporary furloughs during funding lapses. He discussed these plans with Republican House members and met with President Trump yesterday to review the plan. While details remain scarce, a shutdown that extends into next week gives OMB ample time to move forward with the RIFs.
Adding to OMB's leverage, the Supreme Court ruled Friday that the agency's use of a "pocket rescission"—rescinding funds without congressional approval—is legal. The Court determined that proposed foreign aid cuts fall under the president's foreign policy authority and suggested that the plaintiffs lack standing. The decision is expected to embolden similar actions by OMB in the future, potentially deepening tensions between the political parties and between Congress and the White House over spending powers.
So, What's Next? Despite the chilling effect caused by the current shutdown, FY26 negotiations continue to make progress. House Appropriations Chairman Tom Cole (R‑OK) said this week that the Ag‑FDA, MilCon‑VA, and Leg Branch "minibus" was "essentially done" and that he would be open to considering a second minibus that could include Energy and Water, T-HUD, and Interior.
What happens next hinges on how long the shutdown lasts. Negotiators could resume work on appropriations, but if the shutdown drags on it becomes more possible that leadership opts for another year‑long CR. For those looking to influence the process, this would shift focus away from the normal appropriations process toward CR "anomalies"—i.e. legislative provisions that let an agency operate at different funding levels or rates than the previous year or spend on specific items normally prohibited during a CR. Congress could also entertain including congressionally directed spending (commonly knowns as earmarks) in a year-long CR.
For now, Republicans are aiming to have at least the first minibus ready to move soon after the government reopens as they seek to stay the course, working through regular order and keeping their eyes on the ultimate prize: getting full appropriations bills across the finish line even in these difficult circumstances.
Operating Procedure Note: Many federal agencies have activated contingency plans on how they are managing the funding lapse. Details vary by agency, and anyone seeking executive branch meetings in the coming weeks may encounter delays. Operations are also in flux on Capitol Hill, where each member office will identify "essential" staff and determine their policy for conducting meetings during the closure. Capitol Police will staff fewer entrances to the buildings, keeping only the main doors to the building open during business hours.
Our appropriations team is here to answer your questions regarding the shutdown or to advance any of your other appropriations priorities. Please don't hesitate to reach out!
