The government probably isn't going to shut down next week, but all bets are off for October, warns Goldman Sachs (GS) .
The deadline for Washington lawmakers to approve a federal government budget is April 28, leaving members of Congress with just a handful of days when they head back to work on Monday to reach an agreement to avoid a shutdown. The odds of a the government coming to a partial halt next week are low, said Goldman Sachs policy analyst Alec Phillips in a note on Wednesday. The real test will be in October, when more serious decisions will need to be made.
"There is a risk of a partial federal shutdown, but we believe the risk is fairly low next week, rising slightly if the debate is pushed into May, and rising further still later this year," Phillips said.
The most obvious path forward, assuming Republicans and at least some Democrats can come together on a spending bill, is for a continuing resolution to be pushed through both houses of Congress by Thursday of next week. If they're not, the government will begin a partial shutdown on Friday -- President Trump's 100th day in office.
Goldman gives a government shutdown on April 29 a one-in-four chance of happening, because if there isn't an agreement in place at that time, Congress will pass a "clean" short-term extension that avoids controversial issues. Politico reported on Wednesday that lawmakers are likely to pass a one-week stopgap funding bill next week to kick the can down the road a little longer.
If that happens and the debate on government funding is pushed off to May, the probability of a shutdown is somewhat higher, about one-in-three.
One would think that with Republicans in control of the House, Senate and presidency, funding the government would be a fairly simple feat. But to get a spending bill through the Senate requires 60 votes, meaning at least eight Democrats will have to get on board. Democrats have signaled they won't go for bills including poison pills like funding for Trump's Mexico wall or nixing money for Planned Parenthood.
Senator Ted Cruz (R-TX) on Monday said he thinks Democrats want a shutdown.
"You know, I very much hope we don't have a shutdown," Cruz told reporters. "I will say I'm concerned. I think [Senate Minority Leader] Chuck Schumer and the Democrats want a shutdown."
Of course, the GOP isn't exactly a cohesive unit. Their failure to rally around the American Health Care Act forced them to pull the bill from the House floor even before it went to a vote.
"In the House, the bill is likely to need some Democratic support as well, since some fiscal conservatives are likely to vote against it," Phillips said.
The big risk of a shutdown won't come until the fall, when a mix of factors make it a significant risk.
That's about the time when the Treasury Department is expected to run out of money if the debt ceiling isn't suspended or raised. Treasury Secretary Steve Mnuchin asked Congress to address the debt ceiling in March, but thus far, there hasn't been any action.
Moreover, at that point, Congress will need to make more significant decisions regarding spending levels. While Congressional Republicans and the White House might be willing to accept lower defense spending and higher domestic spending for fiscal 2017, once fiscal 2018 kicks off on October 1, they're going to get itchy to get what they want.
Trump last month released a "skinny" budget requesting a $54 billion boost in defense spending and major cuts essentially everywhere else.
"They are much less likely to accept spending bills for the fiscal year that starts October 1 unless they increase defense spending and reduce non-defense spending, and fund some of the President's other initiatives such as increased border enforcement," Phillips said.