Democrats draw a line in the sand with government shutdown

0:00Lauren Fedor: Right now, someone is asking AI a question about your industry. They're looking for the perfect recommendation or an accurate solution, and they're ready to act on it. When AI gives an answer, is your brand a part of it or not? Most companies have no idea which. GIST changes that. We show you where you're visible, where you're not, and give you the tools to do something about it. It's time to make AI work for your brand with GIST. Learn more at gist.ai.

0:33The U.S. government shut down for the first time in almost seven years this week.

0:38Lauren Fedor: We have about 7 ,000 people who visit this Capitol each and every day. But today, that's not going to be the case. That's Speaker of the House Mike Johnson, a Republican. That's because at midnight, Democrats followed through on their threat to shut down the United States government. And in a way, he's right. The Democrats' base has been telling their party to fight back for nine months. They chose this week to hold Republicans' feet to the fire. But will it backfire?

1:11This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance, and the economy. I'm Mark Filippino, and this week we're asking, will Democrats win their fight with Donald Trump? Here with me to discuss is James Politi. He's the FT's Washington Bureau Chief. Hi, James. Hi, good to be with you. Good to have you. And we've also got Lauren Fidor back with us, the FT's Deputy Washington Bureau Chief. Welcome back, Lauren.

1:35Lauren Fedor: Hi, Mark. So let's go back to Tuesday for a moment. Democrats and Republicans argued for weeks about a budget that would have extended the government's spending through the end of November. And then that night on Tuesday, they couldn't come to an agreement. The Senate stands adjourned until 10 a.m. tomorrow. The government officially shut down a minute after midnight on Wednesday. James, Lauren, when did you both go to bed? A little bit after that. It was definitely a late night all around. We have gotten used to late nights in the Washington Bureau of the FT. So by Tuesday evening, it was kind of widely expected that this was the way it was going to go.

2:16And there were no signs of a last minute deal. So the shutdown was happening. Lauren, walk us through the final moments of that evening. What concessions were Democrats trying to get from Republicans?

2:27Lauren Fedor: So I think James is right in his characterization that we kind of knew this was coming. And I think we probably knew this was coming for several days. This was like a, can I say, a slow moving car crash? On Monday, if I can rewind a little bit further, Donald Trump brought the congressional leaders into the Oval Office for the first and only real negotiation meeting. And that didn't seem to go very well. We had Vice President J.D. Vance come out and tell reporters, look, a shutdown is likely. And after that, there didn't really seem to be any progress. Now, I should say that we're recording this on Thursday, October 2nd.

3:05The shutdown happened, of course. And just to put a dictionary definition to what this does to the government, all non-essential government spending has stopped. Federal workers are either furloughed or working without pay. So there's really some high stakes here. And the ripple effects on the American economy are going to be pretty tangible. James, are Republicans and Democrats any closer to getting those health care subsidies that Democrats want that Lauren mentioned into the spending bill? No, it doesn't look like it at the moment. There have been some conversations between lawmakers. We saw a few senators discussing the details of a possible compromise on the floor this week.

3:49But it doesn't seem like there's any high-level talk of a deal at this stage. So we're at a stalemate. Which has turned into a massive finger-pointing competition, it feels like. That press conference Mike Johnson held that we heard from earlier, he delivered his remarks from a podium that had the words, the Democrat shutdown on the front. It seems like the administration and Republicans came prepared. Are we seeing something similar from Democrats?

4:17Lauren Fedor: There's definitely finger pointing happening on all sides of this debate. You know, the Republicans are pretty slick about it. A lot of them are calling this the Schumer shutdown, really going for the kind of alliteration there. And I think some of that rhetoric on their side, just briefly, it has been like pretty aggressive. You know, J.D. Vance has said the Democrats are hostage takers. We had Scott Bessent on TV on Thursday morning calling them terrorists. On the Democratic side, they're saying, look, the Republicans control the White House. They control both chambers of Congress. The American people are going to know who to blame and it's going to be the party who's in charge.

4:56We're not going to support a partisan Republican Republican spending bill that continues to gut the health care of the American people. Not now, not ever.

5:09Lauren Fedor: And they're also coming armed, I think, with some early kind of snap public opinion polling. On Thursday, there was a poll that The Washington Post ran that showed pretty clearly that at least initially in the early stages of what could be a protracted shutdown, the majority of voters are blaming President Trump and the congressional Republicans for this. So what about impact, guys? The White House Budget Office said it was suspending billions of dollars in infrastructure money for primarily Democrat states. How is that going to affect how Democrats think and whether or not this comes across as a self-inflicted wound?

5:44I mean, I think in terms of the impact, I think a lot depends on how long it lasts. And if there's a quick deal to restore funding and get things back on track, then I don't think that this will be seen as a huge political or economic moment. But if it drags on for weeks, then it could have a serious economic impact because government funding will slow to a crawl, federal contracts could be delayed. We won't have the economic data releases that we're used to. So economists and officials will be flying blind. Historically, short shutdowns don't have much of an impact. Bigger shutdowns do leave a mark, you know, in terms of extracting political scalps and bragging rights on Capitol Hill.

6:32In terms of the longer term impact on elections and presidential elections and even congressional elections, that's much more sort of disputable when you look at the historical record. But in any case, this will be seen as a big political moment if it drags on for weeks.

6:50Lauren Fedor: One thing I think that's important to remember about this shutdown is that it could end up being quite different from previous shutdowns in, I would say, two meaningful ways. And it really has to do with the permanence of the shutdown. James rightly points out how things have worked previously with shutdowns that had kind of temporary impact on people being furloughed, but then being brought back to work and receiving back pay or projects being shelved, but then resumed. In this case, the White House is suggesting that they're willing to go much further and actually use this as license to permanently fire people, permanently end funding for various projects.

7:30Lauren Fedor: And if that were to happen, that obviously is going to leave a lasting mark. And when it comes to moves that would specifically impact areas with Democratic voters, I mean, as a negotiating strategy, I think they're really turning the screws on the Democrats. Which means that the decision by the Democrats to shut down the government or to force a shutdown was not taken lightly. I'm thinking about Democrat Senate Minority Leader Chuck Schumer's stance on a government shutdown earlier this year. This is him on the Senate floor in March voting to prevent a pretty similar shutdown. It's not really a decision.

8:05Lauren Fedor: It's a Hobson's choice. either proceed with the bill before us or risk Donald Trump throwing America into the chaos of a shutdown. This, in my view, is no choice at all. James, how did we get from that point in March to now? Well, I think there are two factors. One is that the Trump policies have been much more aggressive than even many Democrats could have imagined. And so when Chuck Schumer and March talked about the choice between the chaos of a shutdown and allowing things to kind of carry forward, I think a lot of Democrats saw that they didn't get a shutdown, but they got a lot of chaos.

8:52And they are getting a lot of pushback from their progressive base to take a tougher stance. And this is one of their few points of leverage. they weren't able to stop the signature sort of tax and spending bill that Trump and the Republican majorities pushed through over the summer. And so this was their kind of main opportunity to show that they had a fight in them. But it certainly is a risky proposition. But again, you know, for the White House, it's also risky to have this fight. And perhaps they're naive to expect that they can put all the pain on Democratic areas and their own voters, conservative voters, Republican voters across the country will not be suffering either.

9:37So I think that there's really a kind of game of chicken happening on both sides.

9:43Lauren Fedor: I would say, just to pick up on that, you know, there's not only this game of chicken, but I think it's been interesting in at least the initial hours and days of the shutdown to see the two parties trying to stake out positions on the policy areas that they know are popular for them. And so I don't think it's a coincidence that the Democrats chose to have this fight, not only over the shutdown, but to make the fight about health care access, because health care is one of the policy areas that the Democrats consistently, not just this year, but over the longer term, are seen as trusted by voters.

10:17Lauren Fedor: And then on the Republican side, they have tried to turn the health care debate on its head and reorient the conversation back to illegal immigration. We know that that is an issue that the president continues to poll very well on. And in their case, they're arguing, claiming that the Democrats are pushing for health care for undocumented migrants. Now, that's a disputed claim and gets into a lot of technicalities of public health care provisions in the country. But you can see how the two sides there are really trying to leverage the politics that they know works for them. Sure. James, believe it or not, we have some elections that are not super far away.

10:57Next month, there are governor's races in both Virginia and New Jersey. There are the midterms next year. There is a high stakes mayoral election in New York City. Is this a proving ground for this, these far more tangible battles that Democrats are going to be fighting? Potentially, yes. Virginia has a lot of federal workers. It has a border with Washington, D.C. So I think the gubernatorial race there will be very important to watch if the shutdown drags on. I think it will have an increasing impact on that race. New Jersey has a gubernatorial race as well in which this could have an impact.

11:35We saw that the White House has threatened to cut or stall funding for some pretty key infrastructure projects in New York City, which is, of course, very close to New Jersey. The midterm elections are still very far away. And I think that most likely these will be a much broader referendum on Trump's policies, on the ability of the Democrats to present an appealing alternative after the disarray that they've been in the shock that they've sort of been in since the election last year. So glad you brought that up because public opinion of Democrats, especially Democrats in Congress, has plummeted.

12:17Chuck Schumer and Akeem Jeffries, who are heads of the party in both chambers of Congress, as we've mentioned, are both viewed more unfavorably than favorably. Are there other leaders the party is looking to right now?

12:28Lauren Fedor: I mean, I think they're a bit leaderless, quite frankly. You know, I think that particularly outside of America looking in, people who are used to like a parliamentary system are asking, who's the leader of the opposition here? And in the American system, it doesn't work like that. You know, we don't have a clear leader of the party. Sure, there's a leader of the Democratic National Committee. You have Chuck Schumer and Hakeem Jeffries who become the kind of figureheads for the party, given their prominence on Capitol Hill and their leadership of their respective kind of conferences. But, you know, when it comes to forming a cohesive message, agenda, mission for the party heading into the midterms and beyond, I think it's really up for grabs.

13:13Lauren Fedor: And I think there's a bit of a vacuum there. And part of that, I would say, fuels the discontent among the Democratic electorate and base because they're looking for leadership. They're looking for answers. They're looking for something that they can kind of grasp onto and say, OK, this is where we're heading after what was a really devastating electoral result for them last November. James, I'm going to end on you here. What do you think the legacy of the shutdown is going to be in six months by the 2028 election? Is there any precedent that we can look to? I know you had mentioned prior shutdowns earlier.

13:49Well, I mean, I think the precedent is the 2018-2019 shutdown, where Trump was widely seen as having been outmaneuvered by Nancy Pelosi, which was sort of part of a wave of rejection of Trump's policies that started with the 2018 midterms and really carried through to his defeat in the 2020 presidential election. And I think in a way, Trump is probably trying to avenge that defeat and win a shutdown of his own. So much depends on how long this drags on. And Trump will almost inevitably present himself as the winner at the end of it. But whether that is an actual victory or not will be the critical thing to watch.

14:40All right, we're going to take a quick break. And when we come back, we are going to do ExitPoll.

14:58Lauren Fedor: Right now, someone is asking AI a question about your industry. They're looking for the perfect recommendation or an accurate solution, and they're ready to act on it. When AI gives an answer, is your brand a part of it or not? Most companies have no idea which. GIST changes that. We show you where you're visible, where you're not, and give you the tools to do something about it. It's time to make AI work for your brand with GIST. Learn more at gist.ai.

15:30We are back with Exit Bowl, where we ask an FT journalist one of your questions. This week, we have two FT journalists, Lauren and James. You're going to help us answer a question from Alexander, who is both from England and Austria. Alexander wants to know, are there any non-MAGA Republicans, people who don't like President Trump's movement or who are offering him any resistance from inside the party? I know we saw a little of that during Trump's first term. Is there any of that now? There are very few of them. I think there are a few voices left on Capitol Hill who will occasionally express some reservations, a bit of concern about some of the policies about potential overreach, who send a few signals of worry about their own prospects in this environment.

16:15But the reality is that so many Republicans are dependent on high turnout from the Trumpian base at this point and are afraid of being punished at the ballot box if they don't have the support of Trump, that there is very little internal resistance left.

16:34Lauren Fedor: I agree with James. I mean, in the year 2025, the Republican Party is the Trump Party, is the MAGA Party. I would say, though, that if you look outside of Washington, you do see elected Republicans who brand themselves and the party a bit differently than President Trump. And one example that comes to mind for me would be in Utah. We've had the governor there, Spencer Cox. He's someone that was not a household name a couple weeks ago. And I think in the wake of the assassination of Charlie Kirk in his state, he's really had a national platform. And the kind of messages that you hear coming out of him are ones of moderation, of bipartisanship, of reaching across the aisle, of lowering the temperature.

17:18Lauren Fedor: Now, he is a supporter of President Trump. He would identify as MAGA, but he does offer a different version or face of Republican Party politics. So look outside of Washington and you may find some examples of that, Alexander. All right. I want to thank our guests. James Politi is the FT's Washington Bureau Chief. Thank you, James. Thanks, Mark. And Lauren Fidor, she's our Deputy Washington Bureau Chief. Thanks, Lauren. Thanks for having me. And Alexander, I hope that answers your question. If you listening right now have a question about U.S. politics and the economy, send me a message at the email in the show notes.

17:52Make sure to include your name and where you're from. And by the way, I know you hear me yammer on show after show, but we want to hear your voice too. So send your question in the form of a voice memo, and we may even play it on the show.

18:09This is Swamp Notes, the US politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes. Our show was produced by Henry Larson. It was mixed by Sam Giovinco. Special thanks to Pierre Nicholson. I'm your host, Mark Filippino. Our acting co-head of audio is Topher Forges. Original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times.

18:44Lauren Fedor: Capital raising is being redefined in real time, from macro disruptions and shifting investor expectations to AI-driven demand and the rise of private credit. When headlines can tilt markets overnight, how can companies stay on course? Strategic Alternatives, the RBC Capital Markets podcast, explores how corporates and investors are navigating new pathways to raise capital, create value, and drive growth. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts. Right now, someone is asking AI a question about your industry. They're looking for the perfect recommendation or an accurate solution, and they're ready to act on it.

19:28Lauren Fedor: When AI gives an answer, is your brand a part of it or not? Most companies have no idea which. GIST changes that. We show you where you're visible, where you're not, and give you the tools to do something about it. It's time to make AI work for your brand with GIST. Learn more at gist.ai. Thank you.