The historic ouster of Kevin McCarthy as House speaker raises the odds of a government shutdown later in the quarter, according to Goldman Sachs analysts.
Congress passed a last-minute stopgap funding bill over the weekend, buying another 45 days to reach a deal on government funding for the next year. While the measure removed the immediate risk of a shutdown, McCarthy’s removal Tuesday and the need for a new House leader suddenly makes 45 days seem like no time at all. And the clock is already ticking.
The “leadership vacuum” makes a shutdown next month more likely, Goldman analysts led by Jan Hatzius said in a note.
“With many policy disputes remaining and a $120 billion difference between the parties on the preferred spending level for fiscal year 2024, it is difficult to see how Congress can pass the 12 necessary full-year spending bills before funding expires on Nov. 17,” Hatzius said.
He added that the next speaker is likely to be “under even more pressure” than McCarthy to avoid another temporary extension or more funding for Ukraine.
However, he noted that even if a new House speaker wasn’t in place by the middle of next month, another temporary funding extension could still be passed.
Goldman’s base case is for a shutdown in the fourth quarter, but that a prolonged shutdown—more than three weeks—is unlikely.
The search for new a new speaker of the House will eat into the funding extension time. It doesn’t mean a shutdown is a sure thing come Nov.17, but it’s far from ideal.
Write to Callum Keown at [email protected]
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