--:-- Ryan Knutson: Welcome to The Journal, our show about money, business and power. I'm Ryan Knutson. It's Wednesday, October 1st.
--:-- Natalie Andrews: Lawmakers in Washington often threaten government shutdowns, and it feels like every year they get pretty close. But today, for the first time in six years, it actually happened.
--:-- Ryan Knutson: The U.S. government is now officially shut down. The U.S. government officially shut down at midnight. The metro was noticeably quieter this morning, commuting to work.
--:-- Natalie Andrews: Hundreds of thousands of people in the district likely woke up to furlough notices with the shutdown. And it seems like the area is quieter because of it.
--:-- Ryan Knutson: We've had government shutdowns twice in this century, one in 2019 and one in 2013. But what makes this one different?
--:-- Natalie Andrews: This one is different primarily because lawmakers are really at a stalemate here in a way that it doesn't seem like there's an easy off-ramp. And that's going to make it hard for any sort of real agreement or breakthrough.
--:-- Ryan Knutson: And there's one more thing making this shutdown different. A man named Russell Vogt, the head of the OMB, which manages the budget, has asked agencies to look at places where they could reduce the size of the federal government during a shutdown. Essentially fire people instead of just put people on furlough. That's never happened.
--:-- Natalie Andrews: In other words, there's a chance this shutdown could reshape the federal government for the long haul.
--:-- Ryan Knutson: Welcome to The Journal, our show about money, business and power. I'm Ryan Knutson. It's Wednesday, October 1st. Coming up on the show, the government shutdown and what it means for the country.
--:-- Ryan Knutson: Briefly, what does shutting down the federal government actually mean?
--:-- Natalie Andrews: It means that there is no longer a message from Congress and appropriations outlining how taxpayer dollars should be spent. So the money is there. People have been paying their taxes. The money has been coming into the government. But the way the government works is that Congress has to decide that spending goes out. They control the purse. And so without any sort of directive to the federal government saying how they should spend the money, the agencies cannot function.
--:-- Ryan Knutson: So they put people on furlough. Only essential employees are supposed to come into work, and they are working without pay.
--:-- Natalie Andrews: So there's still a giant pool of money inside the U.S. Treasury. It's just the instructions for where that money should go expired, basically.
--:-- Ryan Knutson: Yeah, this is one of those schoolhouse rock checks and balances. The money comes into the Treasury. Congress gets to decide how it's spent.
--:-- Natalie Andrews: Republicans right now control the White House and both chambers of Congress, the Senate and the House. So why do they even need Democrats?
--:-- Ryan Knutson: Because they don't have 60 votes in the Senate. Without 60 votes in the Senate, you can't pass legislation. Because Democrats could filibuster.
--:-- Natalie Andrews: Yeah, it's a legislative filibuster. Both parties have support to essentially get rid of it for this very reason.
--:-- Ryan Knutson: At some point, when you try to pass legislation, you get frustrated because you have to be bipartisan. Now, a lot of members of the Senate will tell you that that's what keeps the Senate functioning because they do need to reach across the aisle and come together.
--:-- Natalie Andrews: It's just hard when it hits situations like this where the parties are digging in.
--:-- Ryan Knutson: Congress was supposed to pass a new spending bill by October 1st outlining how the government will allocate money in the new fiscal year.
--:-- Natalie Andrews: Republicans have pushed for a seven-week stopgap bill to extend the current budget, arguing that it would give both sides more time to come up with a spending deal. And so why aren't Democrats agreeing to that?
--:-- Ryan Knutson: Democrats rarely, if you're the party in the minority, have leverage. This is a moment where they have leverage. And so they are using it.
--:-- Natalie Andrews: They are saying they don't like how Republicans have cut Medicare with the tax bill. They don't like how they've seen cuts or changes to the health care system.
--:-- Ryan Knutson: And so they're dug in. They're saying, no, we would like $1.5 trillion in health care spending, or we want promises that that can happen.
--:-- Natalie Andrews: And they've especially focused on these enhanced subsidies from the Affordable Care Act that were enhanced during the pandemic. Basically, more money was given to government health care. And they want those to be restored.
--:-- Ryan Knutson: They expire at the end of this year. Once those subsidies expire, over 4 million Americans could become uninsured, according to the Congressional Budget Office.
--:-- Natalie Andrews: Natalie says the gap between Republicans and Democrats is in some ways philosophical, rather than a fight over one specific issue.
--:-- Ryan Knutson: In the past, people remember Ted Cruz in 2013 really wanting to block the Affordable Care Act. Eventually, he was overruled, but there was a shutdown in the meantime.
--:-- Natalie Andrews: And in 2018, going into 2019, the issue was immigration funding and the border wall. Donald Trump wanted more money for the border.
--:-- Ryan Knutson: In this case, they were just trying to get a short-term stopgap spending bill to November done. And they couldn't even get that.
--:-- Natalie Andrews: So it takes two to tango, or in this case, it takes two not to tango.
--:-- Ryan Knutson: Yes. The Democrats and Republicans are both digging in here.
--:-- Natalie Andrews: What's the calculus for each side?
--:-- Ryan Knutson: And that's the thing. There are real politics at play, and you can't ignore that.
--:-- Natalie Andrews: Chuck Schumer was raked over the coals by his own party in March when he voted to keep the government open.
--:-- Ryan Knutson: He enjoys his place leading the Senate for Democrats. He doesn't want to see that put at risk.
--:-- Natalie Andrews: But if you lose your base, you're in trouble, right?
--:-- Ryan Knutson: And so Chuck Schumer's making a decision here that he got skewered for last time.
--:-- Natalie Andrews: So he is wanting to put up a fight.
--:-- Ryan Knutson: So it's sort of a political calculation on Chuck Schumer's part, the Senate minority leader, that he thinks Democratic voters want to see Democrats stand up and fight.
--:-- Natalie Andrews: Absolutely. They've seen their party be such a mess this year.
--:-- Ryan Knutson: The Democratic Party is struggling with how to push back against Donald Trump.
--:-- Natalie Andrews: And this is their moment of leverage. And they are making a decision that this is what their base wants.
--:-- Ryan Knutson: So let's talk a little bit more about the impact of this and what areas of the government will stop functioning.
--:-- Natalie Andrews: Really all over. If you interact with a government agency, you could expect it to take longer.
--:-- Ryan Knutson: There's going to be fewer people at work.
--:-- Natalie Andrews: But there's also a wide range of things that we just will see not happen.
--:-- Ryan Knutson: There will likely not be a jobs report this Friday.
--:-- Natalie Andrews: If that continues, we know that the Bureau of Labor and Statistics has said that they're not accumulating data.
--:-- Ryan Knutson: But it's already a wobbly job market, and now we won't have data to know just how wobbly.
--:-- Natalie Andrews: The lack of a jobs report could present a problem for the Federal Reserve, which is trying to fight off stubborn inflation without hurting an already weakening job market.
--:-- Ryan Knutson: So, at least for now, the Fed might be flying a little bit blind.
--:-- Natalie Andrews: Beyond the job numbers, the impacts could be far-ranging, especially if the shutdown drags on.
--:-- Ryan Knutson: We don't have updates from every single agency, but we do know that the president's priorities take priority.
--:-- Natalie Andrews: So we may not see cuts from places like immigration or, you know, the DOJ.
--:-- Ryan Knutson: We're still reporting a lot of what's happening now that the shutdown is actually in place.
--:-- Natalie Andrews: How can that be the case? Like, why does the president's priorities get to be funded?
--:-- Ryan Knutson: Because the administration gets to decide what is essential here.
--:-- Natalie Andrews: And we know Donald Trump feels like public safety and cracking down on crime is essential.
--:-- Ryan Knutson: On the Hill, the shutdown has become a blame game between Republicans and Democrats.
--:-- Natalie Andrews: Well, the Democrats want to shut it down. So when you shut it down, you have to do layoffs. So we'd be laying...
--:-- Ryan Knutson: Republicans have failed to get enough votes to avoid a shutdown. They've got to sit down and negotiate with Democrats.
--:-- Natalie Andrews: Outside of Mike Johnson office in the Capitol and also at the White House the administration is playing videos of Democrats saying the shutdowns are so bad when they were on the other side of things and Republicans were threatening a shutdown.
--:-- Ryan Knutson: So they're kind of doing like a greatest hits of Democrats.
--:-- Natalie Andrews: And then Democrats are doing TikToks and videos saying where Republicans, they've left town, especially on the House side, because they didn't come back to Washington this week.
--:-- Ryan Knutson: And they are saying that Republicans want to cut your health care, and that's why they're voting on the CR.
--:-- Natalie Andrews: Trump said yesterday that good things can come from a shutdown.
--:-- Ryan Knutson: Yes. And so we're doing well as a country, so the last thing we want to do is shut it down.
--:-- Natalie Andrews: But a lot of good can come down from shutdowns. We can get rid of a lot of things that we didn't want, and they'd be Democrat things, but they want open borders.
--:-- Ryan Knutson: What did he mean by that?
--:-- Natalie Andrews: He is referring to these reduction in force requests that Russ Vogt, the head of OMB, has sent to agencies.
--:-- Ryan Knutson: This is what makes the shutdown so different. The White House is seeing this as an opportunity.
--:-- Natalie Andrews: The White House's plans for the shutdown? That's next.
--:-- Ryan Knutson: I'm Scott Hanson, host of NFL Red Zone.
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--:-- Ryan Knutson: All right. So remind us who Russell Vogt is, the head of the Office of Management and Budget.
--:-- Natalie Andrews: Russ Vogt is a longtime conservative voice on limiting the size of government.
--:-- Ryan Knutson: He served in the first Trump administration. He helped with the Project 2025 plan that listeners may have heard about.
--:-- Natalie Andrews: Russ Vought would like to see a smaller federal government. He really subscribes to the conservative views that a larger bureaucracy is not good for the future of the country, and he would like to trim it down.
--:-- Ryan Knutson: Trimming back the federal government has been a cornerstone of the Trump administration.
--:-- Natalie Andrews: And it goes beyond just the cuts that were made earlier this year by the Department of Government Efficiency, or DOGE.
--:-- Ryan Knutson: There were also these rescissions that Vogt stepped into where he asked Congress to pull back the money that had been appropriated.
--:-- Natalie Andrews: Congress has authorized this money. The most notable was national public radio and public broadcasting, where he said the government should not be spending money on this.
--:-- Ryan Knutson: And so essentially, Congress has been saying, we've passed these bills that appropriate the way tax dollars ought to be spent.
--:-- Natalie Andrews: And the Trump administration and Russ Vogt in particular are saying, yeah, we don't want that money. Actually, we don't want to spend that money. You can take it back.
--:-- Ryan Knutson: Yeah, take this money back, put it in the Treasury, pay down the debt, whatever you want to do, but we're not going to spend it.
--:-- Natalie Andrews: So then here comes this government shutdown. How does that play into or work against Russ Vogt's vision?
--:-- Ryan Knutson: The shutdown in Russ Votes' terms allows them to say, hey, these offices aren't receiving funding by Congress. Let's cut them.
--:-- Natalie Andrews: But so in Russ Votes' sort of plan is like, well, if there's no funding being—if Congress is not telling us how to spend the money, we can just go ahead and eliminate these areas of government that we don't like.
--:-- Ryan Knutson: Yeah, essentially. It will be argued about, surely, but if Congress hasn't appropriated the money, then these people are operating without furlough, and if they don't fit the president's priorities, maybe they shouldn't have a job anyway.
--:-- Natalie Andrews: Leading up to this shutdown, what steps did Vote take to prepare for this moment?
--:-- Ryan Knutson: VOTE sent quite an explosive memo last week asking all agencies to identify where they could do reductions in force. They call them RIFs The memo went out to all federal agencies so this was an all request by OMB to analyze where they could make cuts
--:-- Natalie Andrews: OMB has not directed agencies to layoff workers yet, but they could start soon.
--:-- Ryan Knutson: In a call with House Republicans today, Vogt said layoffs will begin later this week.
--:-- Natalie Andrews: That's according to participants on the call. Vogt didn't specify how many cuts there will be, but one House Republican said he indicated it would be, quote, consequential.
--:-- Ryan Knutson: In a press conference earlier today, Vice President J.D. Vance said the administration was considering layoffs to protect funding for essential services.
--:-- Natalie Andrews: But let's be honest. If this thing drags on for another few days or, God forbid, another few weeks, we are going to have to lay people off.
--:-- Ryan Knutson: We're going to have to save money in some places so the essential services don't get turned off in other places.
--:-- Natalie Andrews: That is the reality of the government shutdown that Chuck Schumer and the Democrats have foisted upon the administration.
--:-- Ryan Knutson: The legality of the planned layoffs has been challenged by Democrats and unions who represent federal employees.
--:-- Natalie Andrews: And yesterday, Schumer criticized Trump for, quote, using Americans as political pawns.
--:-- Ryan Knutson: Democrats do not want a shutdown. We stand ready to work with Republicans to find a bipartisan compromise and the ball's in their court.
--:-- Natalie Andrews: Have you talked to federal employees? How are they feeling?
--:-- Ryan Knutson: They're stressed. It is a tough time to be a federal employee.
--:-- Natalie Andrews: And I think that's not a partisan thing to say.
--:-- Ryan Knutson: It's a time when some of them are still being asked to send in five things from what they did each week, which Elon Musk required, started requiring the beginning of the administration.
--:-- Natalie Andrews: They don't know if they're going to be put on some sort of cut in the previous.
--:-- Ryan Knutson: And now most federal employees are furloughed.
--:-- Natalie Andrews: I wonder if something that someone might end up putting in the five things I did this week is get fired or furloughed.
--:-- Ryan Knutson: It could be.
--:-- Natalie Andrews: I mean, if you're operating, the weird thing about Washington is federal employees are everywhere.
--:-- Ryan Knutson: And so there was, you know, a few people in my workout class this morning that were waking up to being furloughed.
--:-- Natalie Andrews: So do you think there's a chance that the U.S. government may pass its previous record of a 35-day shutdown, which happened in 2018 into 2019?
--:-- Ryan Knutson: There were several lawmakers on the Hill last night as the government was beginning to shut down that signaled that they thought it could take a long time.
--:-- Natalie Andrews: Both sides are obviously blaming the other, but politically speaking, who do you think has a better chance of weathering the fallout from the shutdown?
--:-- Ryan Knutson: I mean, shutdowns historically have had no real political effect.
--:-- Natalie Andrews: Voters tend to forget, although, you know, consistently they rate Congress as ineffective.
--:-- Ryan Knutson: They have low faith in their federal government.
--:-- Natalie Andrews: A shutdown is not going to help bring that rating up.
--:-- Ryan Knutson: It's not going to help build faith in how your member of Congress is working for you.
--:-- Natalie Andrews: And it'll depend. It depends on how this is carried out.
--:-- Ryan Knutson: It depends on who wins the messaging war, things like that.
--:-- Natalie Andrews: I mean, one thing that's really unique about this shutdown is that the emails that have been going out from various federal agencies, such as Veterans Affairs, when they sent their message out saying what services were being halted, they blamed it on the Democrats.
--:-- Ryan Knutson: So Republicans, just in the way that they've united around Donald Trump, they've learned how you really unite around a message and a short message.
--:-- Natalie Andrews: And it is easier to just point fingers at Democrats than it is for Democrats to say, well, hey, there's these extended ACA subsidies that are going to expire and Republicans agree with us on wanting to renew this, or at least some do, and we want to hold out until we can get all Republicans or enough Republicans to agree with us.
--:-- Ryan Knutson: Like, that's a harder thing to just message on.
--:-- Natalie Andrews: And we'll have to see who wins.
--:-- Natalie Andrews: What does it say about the political moment that we're in right now?
--:-- Ryan Knutson: This just highlights how ineffective Congress has become.
--:-- Natalie Andrews: I hate to sound negative.
--:-- Ryan Knutson: There are a lot of members of Congress, most members of Congress, that earnestly want to improve the world, but there is not enough bipartisan agreement to do it.
--:-- Natalie Andrews: They can't even keep the lights on.
--:-- Ryan Knutson: All right, Natalie Andrews, time to shut down this interview.
--:-- Natalie Andrews: All right, let's do it.
--:-- Ryan Knutson: Hopefully not for a long time.
--:-- Natalie Andrews: To be continued...
