On the brink: 5 shutdown dynamics to watch

IN THIS EDITION

Shutdown: Where we are and what we’ve learned

Mods holding firm in budget showdown

Dems wary of Pentagon shutdown spending plan

The Vault: Key senators leery of stablecoin yield redux

THE TOP

Shutdown: Where we are and what we’ve learned

Happy Tuesday morning.

In less than 19 hours — at 12:01 a.m. Wednesday — the federal government will shut down for the first time since 2018.

This shutdown is the most predictable development of the year. We’ve been saying it was likely since March 31.

It’ll be a late night in the Senate. GOP leaders will bring up both the House-passed Nov. 21 CR and the Democratic counter-proposal for votes again. When these fail, the Senate could hold a bunch of procedural and “show” votes through the midnight deadline. The House isn’t in session.

Let’s review what we’ve learned over the last day and what we’re watching going forward.

1. Schumer and Jeffries. Monday was a bit of a mess for the two top Democratic congressional leaders.

Senate Minority Leader Chuck Schumer floated a week-long stopgap funding bill, among other options, to his rank-and-file early on Monday. Unfortunately for Schumer, this became public before he, House Minority Leader Hakeem Jeffries, Speaker Mike Johnson and Senate Majority Leader John Thune went to the White House for their meeting with President Donald Trump.

Some progressives said this showed Schumer was trying to wriggle out of a shutdown even before it began. It also drew the ire of House Democrats, who privately fretted that their Senate counterpart was laying the groundwork to abandon them again. Schumer’s allies say he was just trying to plan for different contingencies.

During the White House meeting, which one participant described as “spirited,” Schumer and Jeffries peppered Trump with their list of demands to keep the government open. This included everything from extending the enhanced Obamacare tax credits to nixing Trump’s ability to unilaterally cut funding.

Schumer and Jeffries didn’t float a short-term funding bill during the closed-door session. And when Schumer returned to the Capitol, he walked away from the idea.

Republicans say it’s unclear precisely what Democrats’ bottom line is to keep the government open — or reopen it. As we’ve said repeatedly over the last few months, Schumer has the most to lose here. And he has moderate Democrats who may get a bit restless if a shutdown drags on. More on that below.

2. Republicans still have an advantage — for now. In 2013, Republicans shut down the government to repeal Obamacare. In 2018, Republicans shut down the government to try to get money for Trump’s border wall, even though Trump was president.

Both efforts failed. Shutdowns rarely work as a negotiating ploy.

Republicans have the luxury of a simple message this time: We’re willing to negotiate, but not with the threat of a government shutdown hanging over us. It’s the same message Democrats have employed successfully in past showdowns.

By contrast, Democrats have a lot of demands.

Even though the House Republican leadership is making what we think is a bone-headed move by keeping the chamber out of session while federal agencies run out of money, the straightforwardness of the GOP’s message is useful.

But watch out. Democrats are already scheduling Capitol news conferences and other events. Democrats could even try to go to the floor today when the House gavels in for its pro-forma session.

3. Dems trying to drive a wedge between Trump and the Hill GOP. Every Democrat we spoke to after Monday’s Oval Office meeting had the same analysis: Trump would cut a deal, but the president is being held back by Johnson and Thune.

Thune dismissed Schumer’s rhetoric as a desperation move: “I don’t know what they’re talking about. We’re unified. We’re all on the same page.”

Democrats are smart to try to stoke division between the Hill and White House.

There was one moment in the meeting when Trump asked the congressional leaders to keep talking to try to hash out an agreement. Schumer and Jeffries said that they need Trump to get a deal because he will be the ultimate decider. Trump agreed with that.

4. An ACA deal is very hard. One important dynamic that’s getting overlooked in this debate is just how hard it would be for Congress to pass an extension of the Obamacare enhanced premium tax credits.

Senior House Republican sources say that roughly 10% of the conference wants to extend the pricey Covid-era policy. It would take a herculean effort for Trump to get the rank-and-file Republicans to agree to extend the credits.

Even the most ardent GOP supporters of extending the Obamacare subsidies believe they need to be curtailed and eventually phased out for good. There are several different ideas out there for how to achieve this, including means-testing the credits or requiring minimum payments from enrollees.

Others want a clean short-term extension — say, one year — to give Congress more time to iron out a longer-term plan. For conservatives, the policy is a double-whammy: an Obamacare item and a Covid benefit. It’s quite easy for them to say “hell no.”

All of that would need to be ironed out through a very complicated negotiation that would likely require several weeks. That’s not to mention the pressure it would put on Thune and Johnson inside their respective conferences.

Yet Trump and administration officials acknowledge they’re eager to have discussions on this. Plenty of Hill Republicans, especially in the Senate, want to extend the subsidies. Maybe this is the only way out. But that doesn’t mean it’s easy.

5. How long can a shutdown last? The last full government shutdown was 2013. The entire government was shut for 16 days. The 2018 shutdown was far longer, but the Pentagon and other agencies were funded.

Shutdowns end when one side blinks. Schumer can’t blink because of internal party pressure. And do you think Trump wants to fold to Schumer? Based on this unhinged, offensive Trump tweet from Monday night, we’re in for a long shutdown.

— Jake Sherman, Andrew Desiderio, John Bresnahan and Laura Weiss

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FUNDING FIGHT

Mods holding firm in budget showdown

Even as Congress and the White House barrel toward a government shutdown, moderate lawmakers in the House and Senate are standing on the sidelines of the conflict, seemingly comfortable with their leaders’ positions even as a major political crisis unfolds.

These are just the sort of lawmakers who have the leverage to pressure party leaders on both sides to find a deal. But so far, the center-of-the-road legislators are staying mostly in line with party messaging.

Take Sen. Jon Ossoff (D-Ga.), the most vulnerable Senate Democrat in 2026. Ossoff insisted Monday evening there’s still time to find a government funding deal, although he also backed up his party’s position.

“For the White House to get engaged at the 11th hour has not been helpful. It doesn’t bode well,” Ossoff said. “But we can still do what’s right for our constituents’ healthcare and keep the government open. The clock has not yet struck midnight.”

Rep. Tom Suozzi (N.Y.), top Democrat of the bipartisan Problem Solvers Caucus, said he’s sticking with Democratic leadership in this fight.

“The president, the Senate, the House, [Republicans] are all controlled by Republicans. They’re running the show,” Suozzi noted even as he lamented a possible shutdown. “They have an obligation to try to get us to vote for something.”

And Rep. Mike Lawler (N.Y.), of the few GOP moderates, blamed Democrats — especially Senate Minority Leader Chuck Schumer — for a possible shutdown.

“Under Joe Biden’s presidency, Senate Republicans voted 13 times for a clean CR, ending the filibuster and funding the government. But today? When we offer the same thing, [Schumer] retreats,” Lawler tweeted. “It’s cowardice. There is no acceptable excuse to shut down the government.”

Rep. Josh Gottheimer (D-N.J.) expressed confidence that Democrats’ fight for health care concessions gives them “a very strong upper hand.”

“This will resonate with people,” Gottheimer said. “All we’re asking for is to just take care of the premiums… This is very focused, and I think they realize that they’re not in the pole position on this one.”

Mod talks. Some factions of centrist lawmakers in both the Senate and House have been quietly discussing the policy cliff at the heart of the shutdown fight: the enhanced Obamacare subsidies.

Democrats are demanding an extension of the tax credits as part of any funding deal. GOP leaders have said they won’t include it in a short-term CR. But some Republicans are antsy about letting the subsidies lapse entirely and eager to do something by year’s end.

The bipartisan Problem Solvers Caucus, which has been discussing the issue, held a Zoom call Sunday night to talk about the subsidies and the looming shutdown deadline, according to multiple sources with knowledge of the meeting.

If many moderates stay comfortable with their party’s position, there’s less incentive to escalate the push. But a shutdown could get painful for these lawmakers in the days ahead. Then it becomes a question of which side’s moderates blink first.

The wobble. Senate Democrats did get a bit wobbly Monday. Schumer floated an off-ramp to the senators who paved the way for a March continuing resolution: A week-long funding bill to give negotiators more time to find a health care compromise.

Schumer quickly took the prospect off the table later on Monday, telling reporters he wouldn’t support a seven or 10-day CR. Moderates largely kept up their shutdown messaging, although some were interested in a stopgap funding bill.

“One possible exit would be a 10-day continuing resolution and then have some serious talks about, for example, the ACA subsidies,” Sen. Angus King (I-Maine) told us. “I think we could use a little more time.”

— Laura Weiss, Max Cohen, John Bresnahan, Andrew Desiderio and Jake Sherman

RECONCILIATION WATCH

Dems wary of Pentagon shutdown spending plan

News: Democratic lawmakers are warning the Pentagon not to use money from the GOP reconciliation package enacted earlier this year to cover unapproved defense costs during a shutdown.

The calls come after the Defense Department signaled over the weekend it could dip into that $150 billion spending pot to continue funding a host of priorities if government spending lapses after Tuesday.

Sen. Jack Reed (R.I.), the top Democrat on the Senate Armed Services Committee, told us he’s “absolutely” concerned the DOD would use the money in ways Congress didn’t stipulate.

“I think they consider the reconciliation bill sort of a slush fund,” Reed said.

Having a stream of mandatory funding at the ready makes this prospective shutdown different from others. A DOD planning document posted Saturday night shows the money could go toward the Pentagon’s “highest priorities,” including supporting security operations at the U.S.-Mexico border, shipbuilding and critical munitions.

Many of those areas received money under the GOP’s One Big Beautiful Bill Act. In approving the legislation, Congress also laid out stipulations for how it wants the Pentagon to spend the dollars. But ultimately it’s up to military leaders to follow congressional intent.

“There needs to be real scrutiny and oversight to make sure” lawmakers can track the movement of those funds, Sen. Richard Blumenthal (D-Conn.) said Monday.

Waiting game. Lawmakers are still waiting for the Defense Department to send over its detailed plan for spending the reconciliation money. It was initially due to the Hill in August.

Its continued absence makes it difficult for lawmakers to craft a bicameral FY2026 defense appropriations bill. The administration’s defense budget request was predicated on reconciliation passing. And the House defense spending plan was written before the reconciliation package became law in July.

Sen. Mike Rounds (R-S.D.) said the prospect of the DOD leveraging reconciliation money should be “food for thought for Republicans and Democrats” who don’t prioritize completing appropriations bills on time.

“If the DOD feels that they have to make arbitrary or unitary decisions that would not be similar to what Congress wants, then that’s our fault for not getting our work done,” he said.

In other defense news. Defense trade group Aerospace Industries Association wants the Office of Management and Budget to ensure work on agency contracts inked before Wednesday continues during a potential shutdown.

In a Monday letter shared exclusively with us, AIA President and CEO Eric Fanning also asked OMB Director Russ Vought to stipulate that Pentagon contracting personnel are among the workers classified as essential.

— Briana Reilly

The Vault: Key senators leery of stablecoin yield redux

The ink on the GENIUS Act doesn’t seem as wet as it used to be.

The banking industry wants the Senate to re-open the GENIUS Act, imposing further limits on the yields paid out to consumers on their stablecoins.

The crypto industry, meanwhile, warned senators this week to stay clear of the issue. And Washington seems to have gotten the message. Right now, key senators appear firmly aligned with the crypto position.

“I would prefer to do market structure as market structure,” Sen. Kirsten Gillibrand (D-N.Y.) said on Monday, referring to the next big crypto bill legislators are hammering out. “Then, over time, we can improve upon stablecoin regulation, but we have to write the regs first.”

The GENIUS Act was signed into law in July to regulate stablecoins, a type of crypto asset designed to maintain a steady value — usually for conducting other crypto transactions.

Banks lobbied hard, and successfully, for a prohibition on the ability of stablecoins to pay out interest or yields to the folks who hold them. But in the weeks after GENIUS passed, bank advocates adjusted their focus to crypto exchanges, like Coinbase, which would like to offer “rewards” to stablecoin holders.

We’ve been talking about further amendments to GENIUS in part because the CLARITY Act — which the House passed in July to overhaul crypto’s market structure regulation — would introduce some tweaks to GENIUS.

Sen. Cynthia Lummis (R-Wyo.) told us she was still open to those changes, but that wouldn’t include the interest that prohibition banks are angling for.

“I’d like to confine our changes to those recommended by the House and not relitigate other issues,” Lummis said.

Sen. Bernie Moreno (R-Ohio) said banks should be happy with where things stand.

“We’re not going to revisit GENIUS at all. The banks have gotten a lot of love with this administration,” Moreno said.

Not all senators have ruled out stablecoin interest tweaks.

“We’re trying to make sure there is a very good, clear separation between our institutional, traditional banks that are offering yields and interest, and other types of institutions that may be offering types of rewards,” Sen. Ruben Gallego (D-Ariz.) said.

Meanwhile in shutdown prep: Sen. Mike Rounds (R-S.D.) told reporters Monday night that lawmakers were working toward a short-term extension of the National Flood Insurance Program’s authorization.

Rounds said some senators were “talking about” asking for unanimous consent to extend NFIP authorization. Losing NFIP authorization would prevent the federal government from selling and renewing flood insurance policies.

– Brendan Pedersen

THE MONEY GAME

Scoop: Rep. Raja Krishnamoorthi (D-Ill.) raised more than $3 million in the third quarter for his Senate bid and will end September with $17.5 million in the bank. This is his third consecutive quarter raising over $3 million.

Krishnamoorthi is in a three-way primary to succeed Sen. Dick Durbin (D-Ill.). Illinois Lt. Gov. Juliana Stratton and Rep. Robin Kelly (D-Ill.) are also running.

News: Democrat Jordan Wood has crossed over $3 million in donations for his Maine Senate campaign. Per the Wood campaign, the average donation was $18 from 70,000 individual contributors. Wood, who worked for former Rep. Katie Porter (D-Calif.), launched his campaign to knock off Sen. Susan Collins (R-Maine) in April.

Wood first needs to get through a competitive Democratic primary. Political newcomer Graham Platner has already secured Sen. Bernie Sanders’ (I-Vt.) endorsement and raised over $2.5 million in the first month of the campaign. Democratic Gov. Janet Mills is also preparing to run. Brewery owner Dan Kleban is also running.

— Max Cohen and Ally Mutnick

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