Odds for government shutdown rise to 50% as battle to raise debt ceiling expected to be difficult for Trump
When Congress pushed forward the debt ceiling debate earlier this year until October when the new budget was expected to voted up, there were medium to strong expectations of the Republicans being able to raise the debt ceiling in the same way Obama saw it raised several times during his administration. Â However as the President continues to erode support from his own party and from the American people thanks to the silent coup taking place against him in Washington, on Aug. 18 Goldman Sachs issued a warning that the odds of a government shut down had now risen to 50/50.
Low approval ratings raise legislative risks.
In the near term,Â we believe there is a 50% chance of a brief government shutdown,Â as the president seeks to solidify support among his base by embracing more controversial positions, despite needing Democratic support to pass spending legislation.
That said, we expect that the debt limit, which needs to be raised around the same time, will prevent a longer shutdown from occurring. – Goldman Sachs
However with Congress out on its Summer recess, they will only have 12 days upon their return to get a new budget and/or debt ceiling bill to the President’s desk before the current appropriations run out. Â And since the bill will require Democratic support, this is adding to the likelihood of a government shutdown.
â€śThe Treasury Department says the debt ceiling, a statutory limit of outstanding debt obligations that the federal government can hold, must be raised by September 29. Â That gives Congress 12 working days to pass legislation to get to President Donald Trumpâ€™s desk.
â€śIf breached, it could lead to disastrous consequences for the federal government, the US economy, and the global financial system. If the debt ceiling is not raised, the federal government would lose the ability to pay bills it already owes in the form of US Treasury bills and could lead the US to default on some of that debt.
This time around, we have some reservations.Â Quite frankly, this Congress has proven that it is not motivated to do whatâ€™s best for the American people.Â Each representative has an illogical logic unto himself.Â Just ask John McCain â€“ he doesnâ€™t know what he wants until the precise moment he votes.
Whatâ€™s more, these days the debt ceiling has become ultra-politicized in Congress.Â Big time horse trading must first take place before an agreement can be reached.Â Big time bluster and chest pounding must take place too.
The point is, over the past six months this Congress has been incapable of getting a doggone thing done.Â What makes you think theyâ€™ll somehow get their act together in just 12 days? â€“Â Economic Prism
Unfortunately, Congress hasn’t passed anything of substance so far this year, and especially in regards to President Trump’s call to cut spending as a part of his entire debt policy. Â And while it would be very interesting to see what would happen should Congress fail to raise the debt limit since it would instantly transfer power over the purse into the hands of Donald Trump, the biggest loser as always will be the American people, followed closely by Wall Street.
Kenneth Schortgen JrÂ isÂ a writer forÂ The Daily Economist,Â Secretsofthefed.com,Â Roguemoney.net, andÂ Viral Liberty, and hostsÂ the popularÂ youtube podcastÂ on Mondays, Wednesdays and Fridays.Â Ken can alsoÂ be heard Wednesday afternoons giving an weekly economic report on theÂ Angel Clark radio show.