Lawmakers in Washington face a midnight deadline on Friday to fund key parts of the federal government, or about half of it will shut down starting Saturday. The holdup centers on how to pay for the Department of Homeland Security, with Democrats pulling back from a deal after federal agents shot and killed Alex Pretti in Minnesota over the weekend. At the same time, the Federal Reserve decided to leave interest rates unchanged, brushing off direct pressure from President Trump to cut them as inflation picks up.
Background
Funding for several federal agencies runs out at the end of Friday. These include the departments of Defense, Labor, Health and Human Services, Education, Transportation, Housing and Urban Development, State, Treasury, and Homeland Security. The House passed a big package earlier this week to keep them going through September. That bill came from talks between House and Senate members from both parties, plus input from the White House.
Everything looked set to move forward until Saturday, when federal agents shot Alex Pretti during operations in Minnesota. Pretti died from his injuries, sparking outrage among Democrats. They blame Immigration and Customs Enforcement for heavy-handed tactics and want the DHS part of the funding pulled out for separate talks. Senate Democrats, led by Chuck Schumer of New York, say the current bill does not do enough to check ICE's actions.
This fight comes amid broader tensions over immigration enforcement. President Trump has pushed federal agents into states like Minnesota to carry out deportations. Governor Tim Walz, a Democrat, has called for those operations to end. He spoke with Trump on Monday, and the president agreed to look into pulling back some agents so the state can investigate Pretti's death on its own.
DHS already has a huge pot of money from earlier this year—$190 billion under what's called the One Big Beautiful Bill Act. Lawmakers added rules in the new funding bill for monthly reports on how that cash gets spent. They also gave the DHS inspector general an extra $13 million to watch over things.
The Federal Reserve's decision plays out against this chaos. Inflation has been climbing lately, with prices for everyday goods up more than expected. Trump has publicly urged the Fed to lower rates to ease borrowing costs for businesses and families. Fed leaders, though, stuck to their plan, saying steady rates are needed to bring prices under control without hurting jobs.
Key Details
The funding package splits into six bills, but DHS is the sticking point. Democrats got a few wins in the draft: Customs and Border Protection loses $1 billion, ICE funding stays the same but detention space shrinks, and there's $20 million for body cameras at both agencies. Agents would also get de-escalation training. Still, critics say body cameras are not required to be worn all the time.
Democrats want more changes, like rules requiring third-party warrants to enter homes, tougher training for new hires, and a ban on ICE holding U.S. citizens. Schumer called the bill woefully inadequate on reining in ICE abuses.
Republicans point out most of the DHS money goes to non-immigration work. That includes the Transportation Security Administration, cybersecurity efforts, and the Federal Emergency Management Agency. Senator Susan Collins of Maine, who leads the Senate Appropriations Committee, said the bill came from hard bipartisan work.
“I hope we can come together in a constructive way to get this done and to ensure that we do not lurch into a dangerous and detrimental government shutdown,” Collins said.
Senator Katie Britt of Alabama, who handles DHS funding in the Senate, agreed. She stressed the need to fund programs like border security and emergency response.
“We know from recent history that government shutdowns do not help anyone and are not in the best interest of the American people,” Britt said.
White House Press Secretary Karoline Leavitt backed the original deal. She noted Trump's call with Walz and said policy talks on immigration are underway.
Federal Reserve Stance
The Fed's rate decision came hours after the shutdown talk heated up. Chair Jerome Powell explained in a statement that data shows inflation above the 2% target. Unemployment remains low, so no cuts yet. Trump tweeted criticism right after, calling it a mistake that hurts growth. Markets dipped slightly but recovered by midday. Economists say steady rates signal caution as trade tensions and supply issues push prices higher.
On the shutdown side, about 500,000 federal workers could go without pay if it happens. Past shutdowns furloughed staff at national parks, delayed tax refunds, and slowed food aid. This one would hit agencies funded only through January 30 first.
House Republicans tout the package as a win for Trump's agenda. It boosts military pay, border agents, health research, and road fixes while cutting overall spending from current levels. No big policy changes snuck in, they say—just straight funding.
What This Means
A shutdown would disrupt services right away. TSA lines could grow longer at airports, FEMA might pause disaster aid prep, and Defense Department civilians could sit out. Border enforcement would continue with existing funds, but other DHS work might stall.
Talks could stretch into the weekend. Democrats like Senator Adam Schiff of California say they might risk a short shutdown to force better DHS terms. Republicans warn it solves nothing and hurts everyone. The White House urges passing the full package as is.
For the economy, the Fed's hold adds stability amid uncertainty. Steady rates mean mortgages and car loans stay high, curbing spending to tame inflation. Trump's push for cuts aims to spark investment, but the Fed acts independently.
Minnesota's case highlights risks in federal-state clashes. Walz wants fewer agents so his team can probe Pretti's death without interference. Families affected by ICE actions watch closely, as do businesses needing steady government.
Lawmakers have until Friday night. Collins and Britt push for quick fixes. If no deal, expect emergency sessions or a short-term patch. The funding fight tests how far parties will go over immigration in Trump's second term. Broader bills for the year are done, but this snag shows divisions linger.
Democrats hold use in the Senate. They blocked the package Monday, demanding DHS carve-out. Republicans control the House but need 60 Senate votes to beat a filibuster. Bipartisan talks continue behind closed doors.
Inflation data due next week could sway the Fed later. For now, rates sit put. Shutdown or not, pressure builds on all sides to keep government running.
