Bloomberg News

Republican Defections Kill Measure Needed to Avoid Shutdown

September 22, 2011

(Updates stock prices in 19th paragraph, adds quote from Reid in 23rd paragraph.)

Sept. 22 (Bloomberg) -- The U.S. House, in a surprise setback to Republican leaders, defeated a spending bill providing $3.65 billion in aid to victims of recent natural disasters and needed to prevent a government shutdown.

Republicans unhappy with the measure’s overall cost joined Democrats opposed to a proposed cut in an auto industry-loan program to derail the measure yesterday, 230-195. Opposing the legislation were 48 Republicans and 182 Democrats; backing it were 189 Republicans and six Democrats.

The defeat raises the prospect of a government shutdown because the bill would fund the government until Nov. 18. The current fiscal year ends Sept. 30, and Congress is in recess next week.

House Appropriations Committee Chairman Hal Rogers, a Kentucky Republican and the measure’s main author, said he doesn’t know what will happen next. “This is the sausage factory,” he told reporters before heading into his office, using the phrase with which lawmakers often describe the bill- crafting process.

Legislative leaders rarely schedule a vote on a major bill without being assured of the outcome, and the House’s top Republicans had expressed confidence the spending bill would pass.

Michael Steel, a spokesman for House Speaker John Boehner said after the vote that the Ohio Republican and other leaders would “continue to work on a responsible plan that can pass.”

Tea Party Influence

The vote was the latest evidence of Boehner’s sometimes tenuous grasp on a House stocked with Tea Party-backed freshmen as well as veteran lawmakers determined to cut spending. Many of those who broke ranks in yesterday’s vote were the same ones who forced Boehner to postpone a July 28 vote on his proposal for raising the U.S. debt ceiling while reducing spending.

The eventual compromise reached with President Barack Obama on the debt-ceiling dispute only passed the House on Aug. 1 with support from 95 Democrats, while 66 Republicans opposed it.

The defeat of the stopgap funding measure also hints at the trouble Republicans will likely face later this year in attempting to pass a catch-all “omnibus” bill needed to fund the government for the entire 2012 fiscal year.

‘Work With Us’

House Minority Whip Steny Hoyer, a Maryland Democrat, said after yesterday’s vote that to pass the current bill, Republican leaders would have to be more responsive to Democrats. “If they expect our votes, they have to work with us,” Hoyer said.

Representative Rob Andrews, a New Jersey Democrat, said “Republicans again showed how far out of the mainstream they are.”

Many rank-and-file Republicans objected to provisions in the bill that would allow discretionary spending next year to reach $1.043 trillion, which was part of the deal to raise the federal debt ceiling.

Representative Jeff Flake, an Arizona Republican who opposed the measure, complained the figure was $24 billion more than the party agreed to spend when it passed a 2012 budget in April.

“Why in the world would we add $24 billion?” Flake asked. “It’s a disaster.”

Representative Tim Huelskamp, a freshman Republican from Kansas who voted against the measure, said that because he didn’t support the debt-ceiling measure he felt no compunction to agree to the spending levels in the current bill.

“Not nearly good enough,” Huelskamp said of his leadership’s legislation.

Auto Industry Provision

Democrats lined up against the measure because it would be partly financed by a $1.5 billion cut to a program offering loans to automakers and parts manufacturers to help develop more fuel-efficient technologies. Along with arguing the cut would hurt the auto industry, they said disaster aid has traditionally been treated as an emergency need that is financed with borrowed money.

“We warned them -- we told them that an anti-jobs provision would not work,” Representative Sander Levin, a Michigan Democrat, said after the vote. “When we’re working for jobs, you can’t vote for an anti-jobs bill.”

Stocks tumbled and Treasury 30-year yields dropped amid concern central banks are running out of tools to prevent another recession. The Standard & Poor’s 500 Index was down 31.77, or 2.7 percent, to 1,134.99 at 10:08 a.m. Yields on 30- year Treasury bonds decreased 12 basis points, or 0.12 percentage point, to 2.88 percent at 9:34 a.m. in New York, according to Bloomberg Bond Trader prices.

Emergency Relief

The legislation includes $3.4 billion for the Federal Emergency Management Agency and $226 million for the Army Corps of Engineers -- funding to help victims of Hurricane Irene and the earthquake centered in Virginia that occurred Aug. 23, as well those affected by tornadoes and wildfires that have struck the nation’s midsection.

Republicans have promised more aid later after they had more time to examine the administration’s funding requests.

The bill’s defeat may strengthen the hand of Senate Democrats who have called for an additional $3 billion in assistance now, as well as jettisoning the auto-loan cuts.

Senate Majority Leader Harry Reid of Nevada said the House was being "spiteful" and shouldn’t “renege” on the budget agreement reached earlier this year.

Senator Charles Schumer of New York, the chamber’s No. 3 Democrat, called on House Republicans to approve the Senate’s draft of the legislation. He said Democrats won’t renegotiate spending levels for 2012, calling that a “nonstarter” in the Senate.

Shutting the Government

“It will not get anywhere and it will risk shutting the government down,” Schumer told reporters.

Senator Mary Landrieu, a Louisiana Democrat, urged Republicans to drop plans to offset the cost of disaster aid, saying the funding should be considered an emergency. Landrieu, who heads the appropriations panel responsible for disaster relief, said FEMA officials have told her they will run out of existing funds for disasters as early as Sept. 27.

“There are many people in many states who are wondering how in the world Congress could spend $1.3 trillion on wars and rebuilding Iraq and Afghanistan without one offset,” said Landrieu, while “we’re having difficulty getting a vote on $6.9 billion for Americans rebuilding their own farms, homes, bridges and communities.”

--With assistance from Laura Litvan and Kathleen Hunter in Washington. Editors: Don Frederick, Laurie Asseo

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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