The debt ceiling needs to be hiked by Sept. 29 and a spending bill signed by Sept. 30 to avoid a government shutdown. Economists at Goldman Sachs think there's only a 50-50 chance that Congress will get it done in time.
"There are several arguments against a shutdown, particularly that Congress simply kicks the can with a temporary extension, delaying the real debate until later this year," Goldman's Jan Hatzius wrote on Friday, Aug. 25. "However, with little chance that Congress will fund the border wall, a fractured Republican majority in Congress and a decision that ultimately rests with the President, the outcome is hard to predict."
That's a more pessimistic outlook than that of Deutsche Bank economists, who predict a 32.5% chance of no deal emerging.
The debt ceiling is the issue of less concern, Hatzius wrote, "simply because most lawmakers and the White House generally agree it must be raised and it can always be addressed separately from the more contentious spending bill."
The overall economic impact of a shutdown is minor, with Hatzius estimating that a weeklong shutdown would shave 0.2% off fourth-quarter real GDP. Barclays analysts pegged the potential loss at 0.1%. Still, Hatzius added, "these deadlines will consume additional time and energy and distract from other issues like tax reform."
While House Speaker Paul Ryan said Wednesday that he doesn't think a shutdown is "necessary" and implied Congress can come up with stopgap measures until the winter, President Trump threatened -- in a Tuesday speech in Arizona -- to shut down the government if Congress won't fund a border wall. Mexico is supposed to fund Trump's signature policy, but the White House now says the United States will fund it initially and Mexico will recoup the costs.
The president is also publicly feuding with Senate Majority Leader Mitch McConnell and several of his colleagues, further complicating the prospect of legislative consensus.
Congressional Republicans were widely blamed for the most recent government shutdown, in the fall of 2013, a 16-day budget fight which caused 800,000 government employees to be furloughed and over 1 million to work without pay. Repeated impasses over the debt ceiling cost former Speaker John Boehner his job.
Congress returns from its summer recess on Tuesday, Sept. 5.
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