WASHINGTON -- With the U.S. House in chaos over its spending plans, senators of both parties were deep in negotiations on Monday over efforts to head off a government shutdown this weekend through a stopgap measure and whether to include additional aid to Ukraine in the legislation.
Senators and senior staff members had engaged in intense discussions over the past few days on how to proceed given the House impasse, officials said, with the Senate taking steps toward an emergency spending bill that would keep dollars flowing to federal agencies after the current fiscal year ends at midnight Saturday.
People familiar with the talks said a major sticking point was whether to add up to $25 billion in new assistance to Ukraine to what is formally known as a continuing resolution or to keep the legislation free of contentious provisions in what would be a "clean" measure that might enjoy broader support among Republicans in the House, which would also have to pass it to keep the government open.
Moody's Investors Service, the only remaining major credit grader to assign the U.S. a top rating, signaled that its confidence was wavering with news of the potential shutdown.
While "debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of U.S. institutional and governance strength relative to other AAA-rated sovereigns," analysts led by William Foster wrote in a report Monday.
The analysts stopped short of threatening a downgrade, but used unusually blunt language to express their concerns over the trajectory of congressional negotiations to pass a short-term spending bill required to stop a government shutdown when the new U.S. fiscal year begins in October.
"A government shutdown would demonstrate the significant constraints that intensifying political polarization continue to put on U.S. fiscal policymaking during a period of declining fiscal strength, driven by persistent fiscal deficits and deteriorating debt affordability," Moody's added.
Markets have been on watch for further credit actions after Fitch Ratings downgraded the U.S. back in August, citing concerns about political wrangling over the debt ceiling that took the nation to the brink of a default. Moody's latest report -- which leaves its rating of the U.S. unchanged -- is a sign that U.S. debt sustainability and the politics around it will continue to be a theme through the remainder of the year.
"The pressure on the U.S. debt affordability front is building," Foster said in an interview after the release of the report.
"Weaker fiscal policymaking" that results in "persistently high fiscal deficits and higher than expected interest costs" will ultimately weigh on the U.S.'s credit grade, he added.
His comments echo those from all three major credit graders in recent years.
S&P Global Ratings, the first major credit grader to strip the U.S. of its AAA rating back in 2011, said in March that it could again lower the U.S.'s rating "over the next two to three years if unexpected negative political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or jeopardize the dollar's status as the world's leading reserve currency."
Moody's said the shutdown's effect "would be concentrated in areas with a large government presence" and would depend on the length of the closure.
MONEY FOR UKRAINE
Despite broad bipartisan support in the Senate for money for Ukraine, officials said, some Republicans were arguing that it would present an added complication in trying to provide House Speaker Kevin McCarthy with a way out of the spending logjam. A significant bloc of House Republicans opposes any more Ukraine funding and would most likely insist that it be stripped out of the bill and returned to the Senate, slowing any resolution when there is little time to spare.
On Monday, Rep. Marjorie Taylor Greene, R-Ga., a close adviser to McCarthy on the political appetites of the party's base, warned her colleagues against taking up a separate Pentagon spending bill. She said that even a procedural vote to advance that legislation was tantamount to "a vote for BILLIONS in new blood money for the proxy war in Ukraine."
"How many Republicans will vote to give Biden a blank check to fund his proxy war with Russia in Ukraine?" Greene wrote on X, the social media platform formerly known as Twitter.
Congress has approved about $113 billion in military, humanitarian and economic aid to Ukraine in four packages since the invasion by Russia, and President Joe Biden has been seeking another $24 billion.
But a coalition of senators is pressing for the money for Ukraine to be included in the temporary spending measure, arguing that it would be a grave mistake to fail to show support for Ukraine, particularly after President Volodymyr Zelenskyy met personally with members of the Senate during a visit last week and received assurances of continued backing.
"He answered questions for an hour about support from other allies and partners, transparency and accountability about the aid, how he sees the war ending and what he thinks will happen if we don't support Ukraine," said Sen. Chris Coons, D-Del. "I think for us in the Senate, having offered our broad and strong support, to move ahead with appropriations without additional support for Ukraine sends exactly the wrong signal to our partners, our allies and our adversaries around the world."
Sen. Mitch McConnell, R-Ky., the minority leader, has been one of the staunchest backers of Ukraine on Capitol Hill and has also joined with Democrats to pursue higher government spending levels than House Republicans.
But he and other Republicans are also reluctant to put McCarthy in a difficult spot by pressing the Ukraine aid, an approach that could also give the House speaker a ready reason to reject the Senate overture. Some lawmakers have said that they could still quickly pursue the Ukraine spending, aid for natural disaster recovery and some new border security provisions in separate legislation once Congress deals with the immediate crisis of the potential shutdown.
The divide over Ukraine among senators who almost universally back the aid illustrates the difficulties Congress will face this week as it tries to avert a shutdown. The Senate has been awaiting some spending action by the House before taking steps on its own, but with the House bogged down, the Senate is now preparing its own version of an interim spending bill to keep the government fully operational.
Even if the Senate is able to assemble and pass a temporary spending measure in the next few days, it is uncertain whether McCarthy would even bring the legislation to a vote. Doing so would be likely to provoke a formal challenge to his hold on the speakership, presenting him with a choice between shutting down the government or igniting a fight for his job.
When the House returns today, lawmakers are expected to begin considering a series of individual spending bills for the coming fiscal year, although that debate will get the House no closer to sidestepping an imminent shutdown. What McCarthy and his allies hope is that by taking up the measures that contain steep spending cuts sought by conservatives, they can reduce resistance to quick passage of a stopgap bill to keep the government functioning for the next month or two.
Information for this article was contributed by Carl Hulse and Catie Edmonson of The New York Times and by Michael Mackenzie and Erik Wasson of Bloomberg.