President Trump's move to use unspent research and development funds to ensure active-duty military personnel get paychecks this week and Democrats not relenting in their demand for an extension of enhanced Affordable Care Act (ACA) premium tax credits as part of a continuing resolution (CR) to extend government funding are viewed as signs that both sides are girding for a potentially long government shutdown, which has already gone on for more than two weeks.

House Speaker Mike Johnson (R-LA) suggested during an October 13 news conference that it could be a lengthy shutdown. "We're barreling toward one of the longest shutdowns in American history unless Democrats drop their partisan demands and passed a clean, no strings attached budget to reopen the government and pay our federal workers," he said. The Speaker followed on October 14 with comments suggesting that it is the Democrats who made the CR partisan. "I don't have anything to negotiate … we did not load up the temporary funding bill with any Republican priorities or partisan priorities at all. I don't have anything that I can take off of that document to make it more palatable for them. "

In addition to troop paychecks, the Administration said it will use tariff revenue to fund the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). By finding workarounds for essential programs, the White House is signaling that it is removing pressure points that could spur Republicans to relent on the issue of addressing the ACA credits separately from the CR, and keeping the focus on Democrats' demands. GOP members are warning of Thanksgiving travel concerns, but some are doubtful about the power of even holiday airport delays to change the situation. "I haven't seen anything that breaks the stalemate," Sen. Jerry Moran (R-KS) said in a Semafor report.

President Trump has cited the shutdown in withholding funding from blue states and cutting federal jobs through more than 4,100 reductions in force (RIFs) across seven agencies outlined in a court document on Friday (though there were some subsequent hire-backs) and has repeatedly threatened further cuts to Democratic priorities. "The Democrats are getting killed on the shutdown because we're closing up programs that are Democrat programs that we were opposed to. And they're never going to come back in many cases … " the President told reporters at the White House October 14. "So, we're closing up programs that are Democrat programs, that we wanted to close up or that we never wanted to happen. And now we're closing them up and we're not going to let them come back. The Democrats are getting killed and we're going to have a list of them on Friday."

Republicans say they won't negotiate on the premium tax credits issue until Democrats vote to reopen the government through the GOP CR that patches funding until November 21. Politico reported that Republicans are crafting a "menu of options" for eventual negotiations, including income caps, cutoffs for new enrollees, and minimum out-of-pocket premiums.

Asked whether the need to prop up the ACA system is an indication of program flaws, House Democratic leader Hakeem Jeffries (D-NY) said during an October 14 news conference, "No, the overwhelming majority of the American people, including in Republican-run states support an extension of the Affordable Care Act tax credits because they know that the [ACA] has been an important part of ensuring that everyday Americans can afford to go see a doctor when they're sick, when their children are sick, and when their families are sick. And from our standpoint, it's strange that Republicans want to make this a partisan fight."

Treasury Secretary Scott Bessent has suggested that the shutdown is having an adverse effect on the economy. On Fox Business News October 13, the Secretary said, "I think the dirty secret here for why this has dragged on for so long is the Democratic friends in the mainstream media have been downplaying the shutdown, and this is getting serious. It's starting to affect the real economy. It's starting to affect people's lives … "

In an October 13 social media post, Senator Chris Murphy (D-CT) summed up the Democratic position in saying "the obvious next step is to negotiate a compromise. That's how we've always avoided shutdowns. And Republicans need to convene those talks … " He acknowledged that "Democrats need to stand for something right now. And what we need, to vote for this budget, is pretty simple and reasonable: Don't cut people's health care just to pay for a billionaire tax cut."

The Senate is set to vote again on the House-passed CR (H.R. 5371) at 2:15 p.m., which is expected to fail. Republicans are no longer offering votes on the Democratic alternative CR, to patch funding through the end of the month and make enhanced ACA credits permanent. Meanwhile, Senate Republican leaders are preparing to try to move annual appropriations bills during the shutdown. Majority Leader John Thune (R-SD) filed a procedural motion related to the Department of Defense Appropriations Act. He is also reportedly considering bringing up the Military Construction-Veterans Affairs, Agriculture (which includes the Food and Drug Administration), and Legislative Branch appropriations bills package.

Legislative outlook — There has long been speculation about a potential year-end package addressing expiring tax, health and trade items, though it would likely require a bipartisan appropriations bill as the vehicle, and those prospects remain up in the air with the shutdown. An October 14 Daily Tax Report story said: "Popular support for each extender break individually may be insufficient to overcome that strife, said Ray Beeman, who leads EY's Washington Council practice. Because lawmakers' terms aren't expiring this year, they may feel that waiting until 2026 and extending the breaks retroactively is more attractive, Beeman said. The funding lapse has also fractured the attention of lawmakers and their staff, dimming the prospects of planning a package. 'At least, while there's a shutdown, I just don't think anybody's super focused on' other extenders, Beeman said."

Trade — A Wall Street Journal op-ed co-authored by former Speaker Paul Ryan (R-WI) said, "Rather than pursuing new tariffs, Mr. Trump should work with Congress to adopt a destination-based cash flow tax, or DBCFT. This business-tax reform would address many of the president's concerns over trade, expand the American economy, and offset the lost tariff revenue."

The EY Center for Tax Policy's "Tax in a time of transition" webcast series continues on Friday, October 17, at 12 p.m. ET. Register.