A mystifying recent ritual of American politics is set to commence again this week as lawmakers play chicken with a government shutdown that could begin Friday night if gridlock wins out.
It’s perhaps even more bewildering for markets and pretty much everyone else given the Republicans’ unified control of government at the moment.
But, nevertheless, the odds appear to be rising.
«I put the probability at something like 35%,» Doug Holtz-Eakin, president of the American Action Forum, said in a recent episode of Yahoo Finance’s Capitol Gains podcast. «If you’d gone back a month, I’d put it at zero.»
Pangaea Policy’s Terry Haines offered 30% odds in a note to clients over the weekend and Henrietta Treyz of Veda Partners only came in slightly lower with a 25% tally.
And RSM Economist Joseph Brusuelas noted that economic impacts are already evident, with «a kink developing in the U.S. money-market curve» between different Treasury bill rates likely due to shutdown concerns.
Even President Donald Trump appears resigned to the possibility.
«It could happen,» he told reporters on Sunday evening of a shutdown, «you never know.»
Read more: How a government shutdown would impact your money, student loans, Social Security, investments, and more
The issue for the coming days is a 99-page bill put forth over the weekend by House Speaker Mike Johnson that would avert a shutdown until September but be paired with increased spending on some Republican priorities like defense and immigration alongside cuts elsewhere.
Johnson’s problem is that his own party isn’t yet unified behind the bill and the GOP needs Democratic support later this week no matter what.
Not helping matters is that this week’s standoff comes as recession odds appear to be increasing. Trump is now sidestepping that key question for markets as well.
«I hate to predict things like that,» he told Fox News over the weekend of a recession and then again largely avoided the question with reporters on Sunday evening.
Lawmakers have repeatedly ended recent shutdown standoffs with last-minute deals — and they have plenty of off-ramps this time around — but another round of brinksmanship alone could further rattle already unsettled markets that have had a rough March so far.
Read more: What happens to Social Security payments during a government shutdown?
The coming brinksmanship could also be yet another negative check mark in the eyes of the rating agencies, which have cast an increasingly skeptical eye toward US creditworthiness in recent years and often cited government dysfunction as the reason.
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