A Looming Government Shut Down

Congress goes back to work on September 5^th and has less than a month to avoid a government shutdown.  The debt limit must be increased by September 29^th and a spending bill must be approved by September 30^th.  If agreements cannot be reached we may have another government shutdown.  Many people assume since one party is in control of Congress and the White House that a government shutdown is not likely to happen.  According to Goldman Sachs, the last time there was a government shutdown when one party was in charge was during the Carter administration due to disputes between Congressional Democrats and the President.

President Trump seems adamant about funding a border wall with Mexico, which is not well-received by many Republicans in Congress.  Will the President force Congress’ hand to fund the wall as talks regarding the debt ceiling start?   Nobody knows for sure, but things could get interesting.

During the last government shutdown in 2013, around 40% of federal employees (roughly 800,000 employees) were furloughed and did not work during the shutdown.  The longest shutdown on record lasted 21 days during late 1995 into early 1996.  These shutdowns generally have little impact on the overall economy, however they increase uncertainty which can cause a spike in stock market volatility.  Given the stock market is near all-time highs this is cause for concern.

Congress has yet to pass any meaningful legislation this year and a debt limit showdown does not bode well for getting anything done before year-end.  At the beginning of the year anticipation was high for healthcare reform, corporate and individual tax reform and immigration reform.  Unfortunately, very little if any of that seems likely to get done in 2017.