Absence Of Severe Economic Consequences Raises Prospect Of Govt Shutdown

The lack of severe economic consequences, like those associated with a federal government default, may have raised the risk of a US government shutdown in October.

• Goldman Sachs noted on Sunday: “Unlike the debt limit... a shutdown would be much more manageable... the less severe economic effect of a shutdown also makes it more likely that Congress fails to act in time."
• The note carries additional weight after the conservative House Freedom Caucus issued a statementyesterday conditioning support for a 'Continuing Resolution,' to avoid a shutdown, on a raft of contentious measures that will be DOA in the Senate.
• House Speaker Kevin McCarthy’s (R-CA) most obvious route to a CR is to court Democrat votes, as he did to pass the debt limit bill in June.
• Minority Leader Hakeem Jeffries (D-NY) would almost certainly oblige but that move in June was sharply criticised by conservatives and any sign that McCarthy may pursue a similar strategy may prompt the Freedom Caucus to block the legislation from reaching the House floor via the House Rules Committee as they did in June via the irregular strategy of 'voting down the rule.'