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Estimated reading time of this week’s update: 14 minutes
(1) APPROPRIATIONS: Congressional Leaders to Meet with Trump Monday as Shutdown Looms on Wednesday; OMB Threatens Mass Firings—Which May be Illegal.
Background: Fiscal Year 2026 begins this Wednesday, October 1, 2025. Congress has not completed any of the 12 regular appropriations bills to keep agencies and programs funded; only 3 of the 12 bills are in final House-Senate negotiations. Therefore, funding will run out midnight Tuesday, September 30, without enactment of a stopgap continuing resolution “CR.” Passage of a CR requires 60 votes in the Senate. Republicans, with only 53 votes in the Senate, need Democratic support.
The House passed a GOP continuing resolution (“CR”) 217-212 on Friday, September 19, but later that day the Senate failed to pass the House CR 44-48, and also failed to pass the Democratic alternative (which included healthcare relief provisions) 47-45 (60 votes being required).
House-Passed CR (HR 5371): CR Text | Summary | GOP Stmt | D-Stmt
Failed Democratic Alternative: Text | Sec-by-Sec Summ | Fact Sheet | Health Fact Sheet | D-Stmt
MONDAY 2pm WHITE HOUSE MEETING: Monday afternoon, the bipartisan congressional leadership will meet with President Trump at the White House to discuss the looming shutdown. (Last week Trump canceled a scheduled meeting.) Read more from: WP | WSJ | NYT | Bloomberg
Politico reports that Senate Republicans plan another vote on the House-passed CR on Tuesday, September 30, 2025. However, passage is unlikely unless Monday’s White House meeting produces agreement on two key Democratic concerns:
a timetable to extend expanded Affordable Care Act subsidies (which have doubled Affordable Care Act enrollments since 2021 and broadly impact health insurance premiums), and
restoration of foreign aid funds canceled by the Office of Management and Budget (OMB) through a “pocket-rescission” viewed by many in Congress as illegal.
Even if such an agreement can be reached on Monday, Speaker Johnson would have to call the House back from recess to approve a Senate-amended CR.
Background on the Impasse--Democrats want healthcare relief provisions added to the funding stopgap measure and a reversal of presidential rescissions, while the White House has been urging Republicans not to negotiate. Specifically, Democrats are seeking:
extension of expanded Affordable Care Act premium subsidies (expiring in December, but extension would need to occur sooner due to insurance company timetables for setting premium rates);
repeal of the recent Medicaid cuts (which is unlikely); and
President Trump has a history of shutting down the government and OMB Director Russell Vought sees a shutdown as an opportunity for additional mass firings and ending programs the Administration doesn’t like:
The longest shutdown in history occurred during the first Trump Administration, from December 22, 2018, through January 25, 2019, although it was not a total shutdown. A shutdown this week would impact all federal departments since no bills have passed.
On Wednesday, OMB issued a memorandum stating: “With respect to those Federal programs whose funding would lapse… such programs are no longer statutorily required to be carried out. Therefore… agencies are directed to use this opportunity to consider Reduction in Force (RIF) notices for all employees in programs, projects, or activities (PPAs) that satisfy all three of the following conditions: (1) discretionary funding lapses on October 1, 2025; (2) another source of funding… is not currently available; and (3) the PPA is not consistent with the President’s priorities.”
(Publisher’s Note:) RIFs during a Shutdown may be Illegal: It may be a violation of the Antideficiency Act for agencies to follow OMB Director Russell Vought’s instructions to make Reductions in Force (RIFs) during a shutdown, because RIFs are unrelated to “the safety of human life or the protection of property.”
What to Know About Shutdowns:
Shutdowns are required by the federal Antideficiency Act, which makes it illegal for federal employees to incur obligations on behalf of the federal government without congressional spending authority.
Federal Employees are Furloughed Unless They Are “Excepted”: All federal employees must be furloughed when an agency is without funding, except when an employee’s duties are classified as “excepted activities” relating to the “safety of human life or the protection of property.” Excepted employees continue to work, but are not paid until appropriations are enacted.
Which Federal Employees Will Be Classified as “Excepted?” The answer is: we do not yet know, for most departments. President Trump’s Office of Management and Budget, unlike previous administrations and the first Trump Administration, has failed to post on its website shutdown plans for each of the federal agencies—instead saying only, “In accordance with Circular A-11, agency contingency plans for a lapse in appropriations are hosted solely on each agency’s website.” See our shutdown webpage for the latest information we have on agency shutdown plans.
What About Back Pay? When appropriations become available, excepted employees must receive back-pay; and Congress has customarily also granted back pay to furloughed employees, but that is not guaranteed.
What happens to federal contractors? In general, departments and agencies cannot pay contractors during a shutdown; however, contracts that are funded by multiyear appropriations may continue; and contracts for services that cross fiscal years may continue.
What about the courts? The Supreme Court continues operations relying on permanent spending authority. As for lower courts, they remained open during the last Trump shutdown using incoming court fees and funds available beyond the current fiscal year.
For more background on shutdowns, see https://appropriations.com/government-shutdown/.
Overview of Action on the 12 Regular Appropriation Bills: The House Appropriations Committee has completed action on 12 Republican-only bills and 3 of the bills have been approved on the Floor (Defense, Energy-Water, and MilCon-VA). The Senate Appropriations Committee has completed action on 8 of the 12 bills (with substantial bipartisan support) and 3 of the bills have been approved by the full Senate (Agriculture, Leg. Br., MilCon-VA).
The House and Senate are currently negotiating final versions of 3 bills: the Ag-Rural-FDA, Legislative Branch, and Military Construction-VA bills. For daily updates with full details, see appropriations.com.
(2) PRESIDENTIAL IMPOUNDMENTS: Supreme Court Allows Trump to Cancel $4 billion in Foreign Aid Using Previously Illegal “Pocket Rescission”
On August 28, 2025, President Trump’s Office of Management and Budget sent to Congress a “proposed” rescission of $4.9 billion in foreign aid spending. Because the Impoundment Control Act permits the President to withhold the funds for 45 days while Congress considers whether to approve the rescission, these funds were effectively canceled because less than 45 days remained in the fiscal year (ending September 30).
This attempt to end-run Congress’s authority to determine whether to allow proposed rescissions is being called a “pocket rescission” – a reference to the “pocket veto” under which a President can kill a congressionally passed bill by taking no action while Congress is not in session (so the measure cannot be returned to the originating chamber for an override vote).
Unlike a pocket veto, which is specifically permitted by the Constitution, the pocket rescission had been previously ruled illegal by the Government Accountability Office. In 2018, the GAO concluded that the Impoundment Control Act “does not permit the withholding of funds proposed for rescission through their expiration date,” adding, “The plain language of the ICA permits only the temporary withholding of budget authority and provides that unless Congress rescinds the amounts at issue, they must be made available for obligation.”
On September 4, 2025, U.S. District Judge Amir Ali ruled that the Trump Administration’s attempted pocket rescission was likely illegal and ordered release of the funds that were set to expire at month’s end. The judge wrote, the law is “explicit that it is congressional action—not the President’s transmission of a special message—that triggers rescission of the earlier appropriations.”
The D.C. Circuit Court of Appeals declined to overturn the lower court’s ruling, but on September 9, 2025, Chief Justice Roberts temporarily blocked Judge Ali’s order. Then on Friday, September 26, 2025—in a highly consequential action—the Supreme Court extended the block indefinitely in a 6-3 unsigned order—effectively allowing the Trump Administration to rescind (cancel) the foreign aid funds without congressional approval.
(Publisher’s analysis: Supreme Court’s Stunning Rejection of Congress’s Constitutional Authority Over Appropriations. The legal requirement for congressional approval of rescission proposals is the core element of the Impoundment Control Act. Congress’s authority is based squarely on Article I, Section 9 of the Constitution which established the Legislative Branch and gave to Congress sole authority over appropriations. However, the Court’s unsigned majority opinion ignores Congress’s sole authority, instead allowing OMB to effectively cancel appropriated funds out of deference to “the Executive’s conduct of foreign affairs.” While the majority adds that “this order should not be read as a final determination on the merits,” the damage is done; funds have been withheld and will be effectively canceled on September 30 without congressional approval.
The dissenting opinion of Justice Kagan (joined by Justices Sotomayor and Jackson) highlights the highly consequential effect of the majority’s action: “(T)he stakes are high: At issue is the allocation of power between the Executive and Congress over the expenditure of public monies... We… should have… allowed the lower courts to go forward, and ensured that the weighty question presented here receives the consideration it deserves… The stay the majority grants today suspends that court order. The effect is to prevent the funds from reaching their intended recipients—not just now but (because of their impending expiration) for all time... (T)hat result conflicts with the separation of powers.”
(3) TARIFF ACTIONS: Trump Announces Steep New Tariffs; Trade War with China Slashes U.S. Soybean Exports
Last Thursday, President Trump announced sweeping new import tariffs, which go into effect this Wednesday, October 1, including:
100% duties on drugs under patent (unless manufacturers have broken ground on U.S. manufacturing plants),
50% on kitchen cabinets and bathroom vanities,
30% on upholstered furniture, and
25% on heavy-duty trucks.
It is unclear how the newly announced tariffs would apply where they conflict with previously announced agreements. This is the chaotic result of Trump announcing new tariffs by tweet and Administration officials having to explain the new policies after the fact.
Instead of the new tariffs using “economic emergency” authority—which are under review by the Supreme Court—the new tariffs rely on “national security” justifications (which appear dubious for the announced tariffs). Read more from Reuters HERE.
The New York Times reports that China bought $12.6 billion in U.S. soybean exports last year, but this year has bought none. The reason: retaliatory tariffs China has placed on imports from the U.S. in response to Trump’s trade war, boosting the cost of American soybeans. This is significant for American farmers because China bought half of all American soybean exports last year. According to the Times, “throughout the summer, farmers hoped the Trump administration and China would reach a trade agreement that would drop the tariff on their crops, but so far, no relief…” Instead, the Trump Administration has announced support for Argentina’s economy, easing the way for Argentina to increase soybean exports to China. The Administration has given conflicting signals on its willingness to provide relief to soybean farmers who are facing hard times this fall as a result of its tariff policies.
(4) THE ECONOMY: GDP Rose but Consumers Pessimistic
GDP Rose But Consumers Deeply Pessimistic: Gross Domestic Product (GDP) rose at an annualized rate of 3.8% during the second quarter, in revised estimates announced Thursday by the Commerce Department, but at the same time, consumers are nearly as pessimistic today as they were during the 2008 financial crisis and the stagflation of the 1980s.
(5) OTHER MAJOR DEVELOPMENTS ACROSS GOVERNMENT: Trump Blasts UN, Foreign Leaders; Trump Sends Troops to Portland Ordering “Full Force”; Healthcare Costs Skyrocketing; Trump Spreads Conspiracy Theories about Autism, Vaccines; OMB Mid-Session Review Lacks Credibility; SCOTUS Reviewing Independence of Commissions, Boards; New Tax Breaks have Complications
Trump Blasts UN and Foreign Leaders: In a combative and unprecedented speech at the United Nations, President Trump blasted the UN and member countries over “uncontrolled migration” and his false claim that climate change is a “con job”—while heaping praise on himself and saying he is “right about everything.”
Meanwhile, the U.S. has stopped paying its bills to the UN and has withdrawn from the World Health Organization. Read more.
President Trump on Saturday said he is directing War Secretary Pete Hegseth to send U.S. troops to Portland, Oregon and to use “full force, if necessary,” claiming the American city is “war ravaged” and ICE facilities are “under siege from attack by Antifa, and other domestic terrorists.” An 1878 federal law bars the use of federal troops to enforce domestic law. Read more.
Health Care Costs Skyrocketing with Expiration of Expanded Affordable Care Act Subsidies: Employers say they are facing the biggest increases in health costs in more than a decade, almost 9 percent on average. Meanwhile, California regulators are predicting a doubling of monthly premiums and almost a quarter of state marketplace enrollees dropping coverage.
On Monday, Trump unleased—without evidence—attacks on long-standing federal vaccine recommendations and advanced debunked conspiracy theories about Autism. “Today’s White House event on autism was filled with dangerous claims and misleading information that sends a confusing message to parents and expecting parents and does a disservice to autistic individuals,” said Susan Kressly, President of the American Academy of Pediatrics.
OMB Mid-Session Review Lacks Credibility: Earlier this month, the Office of Management and Budget released its Mid-Session Review of the President’s FY 2026 budget request. The fiscally conservative Committee for a Responsible Federal Budget called the update a “dose of fiscal fantasy,” estimating the Trump budget proposals would reduce deficits by less than 8% of what OMB claims.
Court Reviewing Independence of Commissions and Boards: The Supreme Court said last Monday, in a case challenging the firing of a Federal Trade Commission member (Trump v. Slaughter), it will reconsider a 1935 precedent limiting when Presidents can fire independent commission and board members. The 90-year-old precedent, known as Humphrey’s Executor, limits removal to cases of misconduct or neglect of duty. The current majority has previously indicated the President likely has power to remove most independent commission and board members at will—although the Federal Reserve might be different. The Court will hear arguments in December on this highly consequential case. Read more from AP.
Taxes: Trump’s new tax break for corporate R&D is hitting a roadblock – the corporate minimum tax; and Trump’s temporary tax break for certain tips could get complicated.
About the author: Charles S. Konigsberg, J.D., served as Assistant Director at the White House Office of Management and Budget for three successive Budget Directors; General Counsel at the U.S. Senate Finance Committee; Minority Chief Counsel at the U.S. Senate Rules Committee; Staff Attorney at the U.S. Senate Budget Committee; Director of Congressional Affairs at CFPB and AmeriCorps; and Staff Director of a national bipartisan budget task force.
He is author of the book, Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. Click here to purchase.
He is also Publisher of:
Appropriations.com which tracks the 12 appropriation bills and presidential impoundment developments each day;
andGovBudget.com which tracks major developments, by subject area, each day including: Law & Democracy | Cut Tracker | WH-OMB-DOGE | Economic News | Federal Taxes | Tariffs | Health and Human Services Programs | Debt, Deficits and Debt Limit | Discretionary Spending Programs | Mandatory Spending Programs | Immigration | Disabilities Programs | Defense | Climate/Energy | Budget Process
Speaking engagements and press interviews can be scheduled by calling: (202) 818-8578 or (301) 509-5688. Email comments, suggestions, and questions to: ckonigsberg@capitolpublicpolicy.com.
Keep it up, you will have a lot to keep you busy this week....