**MNI: 5 Things To Look For: The Teflon US Government Shutdown

By Kevin Kastner

     WASHINGTON (MNI) - The U.S. government is nearing a deal to avert yet

another budget shutdown starting midnight ET Thursday night, but between

immigration, the debt limit, and an expected rate hike at the next FOMC meeting,

this latest budget crisis and market volatility may be rivaled by a difficult

March. 

     Here are five things to keep in mind:

- Defense vs Nondefense. While the House passed a resolution Wednesday that

would keep the government open until March 23, the legislation contains a larger

and longer term of funding for defense spending, and no increase in domestic

spending. As is, this bill will not get past Democrats in the Senate, whose

votes are need. Senate leaders have said they are very close to agreeing on

their own version, but it is a near certainty that it will not match the House

version, so the two chambers will have to reconcile these differences, likely

with more domestic spending.

- The Trump Factor. Assuming the House and Senate agree on a bill to send to

President Donald Trump, there is some uncertainty what happens at that point.

While it would be a political risk to not sign the legislation, the president

said Tuesday that a government shutdown would not be a bad idea if it meant

getting funding for a boarder wall with Mexico and increased spending on boarder

security included in the legislation. Congressional Democrats would not move

forward with that conversation without the promised vote on legislation to

extend the Deferred Action for Childhood Arrivals (DACA).

- DACA Debate Looming. The legislation is signed, that only puts the deadline

further out, likely to the March 23 date in the current House legislation. There

are a number of things that will happen between now and then that will

complicate the process next time around. For one thing, the deadline for DACA is

March 5, which will be top on the agenda of Congressional Democrats as February

goes on. Senate Republican leadership have agreed to allow debate on the floor

regarding DACA as a condition of Democrats agreeing to end the January shutdown

and will remain a condition for the current crisis. If, after the debate, an

extension is not agreed to by Republicans and Trump, unlikely with funding for

the wall, it will make discussions leading up to March 23 more than tense.

- Debt-Limit Battle. Another issue coming up in March is the deadline for

raising the debt ceiling. Treasury has said that it can continue using

extraordinary measures until early March to avoid defaulting on its obligations,

earlier than originally thought due to the recently enacted budget cuts that are

expected to trim revenues and so require the Treasury to borrow more. The battle

around debt limit increases is a Washington tradition, even when one party

controls both houses of Congress and the White House, so this time around will

be no different.

- Markets Looking Toward March, Not To The Hill. Markets appear to be paying

little attention to the current budget crisis, assuming that it will be resolved

before the deadline Thursday night, as usual. Analysts note that even if there

is very short shutdown similar to the one in January, the impact on economic

growth would be minimal, perhaps a little as 0.2 percentage point if a shutdown

is less than a week. The debt limit is another story, as the first default in

U.S. history would have rippling effects across world economies. However, the

current market volatility has more to do with inflation concerns than government

policy, as analysts eye the next FOMC meeting scheduled for March 20-21, right

before the assumed next budget shutdown.

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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