Risk Of Partial Government Shutdown Increases

President Biden will hold a White House meeting tomorrow with the majority and minority leaders of both chambers of Congress to discuss averting a partial government shutdown on March 1.

• Senate Majority Leader Chuck Schumer (D-NY) said yesterday: “...we will once again face the specter of a harmful and unnecessary government shutdown caused by an extreme wing within the Republican Party.”
• House Speaker Mike Johnson (R-LA) responded on X: “Despite the counterproductive rhetoric in Leader Schumer’s letter, the House has worked nonstop, and is continuing to work in good faith...”
• Next steps: A fourth Continuing Resolution of FY2024 is looking likely. A stopgap is unlikely to extend beyond April 30 when a one-percent budget cut would be enforced across government agencies.
• As the economic impact of a partial government shutdown would be limited, Johnson may conclude that a shutdown on March 1 is an acceptable way to seek concessions and manage the demands of his conservative flank.
• If a full shutdown takes place on March 8, key economic data may be delayed - NFP due March 8 and CPI due March 12. Biden’s March 7 State of the Union address would also be delayed.
• The weekend’s action has done little to impact our risk ratings. The risk of a partial shutdown on March 1 is high but the risk of a more damaging full shutdown on March 8 and budget cuts on April 30 remains low. However, the risk of both would tick up if a short-term solution isn't agreed this week.