Shutdown Risk Rises as Democrats Block DHS Funding
Senate Democrats threaten to withhold votes on $1.2 trillion spending package over Homeland Security provisions. Deadline is Friday.
A partial government shutdown by weekend is suddenly in play.
Senate Democrats announced they will not vote for a $1.2 trillion funding package if it includes appropriations for the Department of Homeland Security. The deadline to avoid a shutdown is Friday, and Republicans don't have the votes to pass the bill without Democratic support.
"Senate Democrats will not allow the current DHS funding bill to move forward," Minority Leader Chuck Schumer said in a statement. He urged Republicans to pass the other five spending bills separately while the DHS portion gets renegotiated.
What Triggered the Standoff
The immediate catalyst was a shooting in Minneapolis on Saturday.
Alex Pretti was killed by federal immigration agents—the second such incident this month. The shooting inflamed tensions over ICE enforcement tactics and galvanized Democrats to demand reforms before funding the agency's parent department.
Before Saturday, government funding looked settled. The House had passed its appropriations bills, and Senate passage was expected this week. Now the math has changed.
The Math Problem
Republicans hold 53 Senate seats. The funding package requires 60 votes to overcome a filibuster. That means at least seven Democrats need to vote yes.
A GOP spokesperson said Republicans "will not remove the DHS funding portion" and plan to proceed as scheduled, hoping Democrats "can find a path forward."
But even if Democrats agreed to separate DHS from the rest, that would require House re-approval—and the House is on recess until February 2. Speaker Mike Johnson is unlikely to call members back early.
The practical effect: a partial shutdown looks increasingly likely.
What Shuts Down
Not everything stops.
DHS operations considered "essential" continue regardless of funding status. ICE agents are classified as excepted workers and would keep working—unpaid, but on the job. The agency also received $75 billion in supplemental funding last year, giving it a financial cushion.
But other DHS components would feel the impact. FEMA, TSA, and Coast Guard employees would be required to work without pay. The same applies to the departments of State, Treasury, Transportation, Health and Human Services, and Housing and Urban Development.
Defense continues operating under its separately-passed appropriation.
Market Reaction
Monday's market rally suggested investors aren't panicking yet. The S&P 500 gained 0.6%, and the Dow added 0.7%.
But shutdown dynamics can shift quickly. If Friday arrives without a deal, traders will reassess. Government shutdowns have historically caused short-term volatility without lasting damage—but each one is slightly different.
The 2018-2019 shutdown lasted 35 days and shaved an estimated 0.2% from Q1 GDP. A shorter disruption would have minimal economic impact. A longer standoff could start affecting consumer confidence, especially if federal workers miss multiple paychecks.
The Fed Complication
The shutdown risk arrives during the same week as the Federal Reserve's first meeting of 2026.
Chair Powell's press conference Wednesday could get questions about fiscal uncertainty and its implications for monetary policy. Central bankers generally avoid commenting on congressional negotiations, but the timing creates an awkward backdrop.
Markets have largely ignored shutdown risk this cycle. Whether that confidence is warranted depends on whether cooler heads prevail by Friday.