Government Shutdown Odds Rise To 40% According To Deutsche Bank

Tyler Durden's picture

With rumblings growing about a possible Washington shutdown on April 28 when the current continuing resolution expires, Deutsche Bank's Washington expert Frank Kelly yesterday hosted a client call on the political implications of last week's events.

He suggested that the surprise withdrawal of the Republican healthcare bill on Friday is a sign of the continued division within the Republican Party and is perhaps a precursor to growing political and policy risks in the US, and as discussed yesterday, he notes that even before considering the difficulties involved in passing President Trump’s tax reforms, there exists a very real possibility of a government shutdown on April 28 when the current continuing resolutions set to expire.

According to Kelly, there is a significant chance that the Freedom Caucus will reject a new continuing resolution due to their opposition to the continued funding of Planned Parenthood and Obamacare, while Trump’s spending plans for a border wall will see opposition from both Democrats and Republicans in the Senate.

As a result, Frank estimates the probability of a government shutdown at roughly 40% and notes that the next 2 weeks will be critical to watch.

Beyond the risks of a government shutdown, policy uncertainty continues to manifest itself in the form of questions surrounding Trump’s tax reform bill: Frank expects that the controversial Border Adjustment Tax (BAT) will not even make it into the final bill (at least not in its current form) and that the new corporate tax rate will likely be closer to 25% rather than the expected 15-20% range. Also despite the failure of the healthcare bill there is unlikely to be any acceleration in the proceedings on tax reform to fill the gap. The bill remains likely to go to Congress sometime in the first two weeks of  May, and will likely only be picked up by the Senate in September.

Given these developing uncertainties, Frank suggests that markets should downgrade their expectations of progress going forward.

Meanwhile, in its latest morning note JPM takes the opposite view and writes that the risks of a shutdown are falling as Republicans will propose a bill void of some of the more controversial spending proposals, and it sounds like the GOP could be moving towards a “small” tax bill (note that Gary Cohn is expected to brief Trump on tax options this Thurs 3/30). As a result, and unlike DB's recommendation to trim optimism, JPM suggests that "the broader domestic equity macro backdrop remains the same as before."

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LawsofPhysics's picture

Go ahead shut it down, I triple dog dare you. While you useless overcompensated puppets are doing that, Janet can raise the FFR to 12%, fuck it.

get long sharecropping and guillotines.

About damn time if you ask me.

IronSights on'um's picture

I wish they would.  a man can hope.

FrozenGoodz's picture

Drop the wall in the desert hopes folks then we've no trouble passing your cuts to arts, children, schools, vets ... you were duped

NoDebt's picture

The odds of a government shut-down are 0%, same as they always are.  We could never get that lucky.


new game's picture

shutdown smutdown


not even a popcorn event, much less pulling out the good stuff.

BullyBearish's picture

DB will shut down before the U.S.A...

SerfsUp's picture

The odds of a government shutdown are 100% if there's border wall funding in the bill.  Open borders has bi-partisan support in Congress because they fear the natives will eventually hang them for their brazen corruption otherwise.  Corruption also has bi-partisan support.  So they need 3rd world monkeys who can barely tie their shoes to out-vote the citizens who have figured it all out. 

On the other hand, a gov't shutdown is a great thing if you're a Deplorable.  Spending comes immediately into balance with revenues and discretionary spending is slashed.  All the useless gov't employees get furloughed.  Many will quit if the shutdown drags out and there's no paycheck. The military, police and courts are exempted.  A shutdown would be a beautiful thing, Congress should make it permanent after-the-fact.

LawsofPhysics's picture

You obviously were NOT paying attention the last time the government "shutdown".  Everyone still got paid you stupid fuck. The last "shutdown" amounted to what was a two-week paid vacation on the taxpayer!

SerfsUp's picture

Fuck off, they got paid after the "shutdown" ended.  Not during.  Why should the shutdown end?  Let it drag for months until a big chunk of gov't employees run out of money and have to quit to find a "real" job.

LawsofPhysics's picture

They still got paid, period. A real revolution is the only thing that would shut it down permanently and the average 'merican is far too lazy and stupid.

Whoa Dammit's picture

Being as we are Ruled by Retards, a federal government shut down is a good thing. Maybe it can spread to state and local levels too.

rejected's picture

What does that say for us when we allow the retards to 'rule'?

GlassHouse101's picture

Everyone knows what we're doing is un-sustainable . . just default now and get it over with!

Never One Roach's picture

If they shut er down, Walmart will be fuller with gubmint peeples.

Threat of D-fault should push Treasuries up to 10% or more...finally.

Reality hits them.

RagaMuffin's picture

Foreclose on Ft. Knox?   Hmmmmmmmmm.......

GunnerySgtHartman's picture

These so-called "government shutdowns" are a joke; all they do is allow Democrats to try and incite panic among the general public.  During the last "government shutdown," less than 40% of government agencies actually closed.  The rest were deemed "essential" under federal law and kept operating with no change.  Did the sun come up the next day?  Yes.  Did life go on?  Yes.  So do we really need those agencies which were closed during the last shutdown???

NoDebt's picture

That's because everything the government does is essential.  Just ask them.



Jack Offelday's picture

Most working class people wouldn't even notice a government shutdown.  Seriously.

1980XLS's picture

Last time it happened, I neither noticed nor cared.

Sadly when it does, the Gubnt doesn't even save any money. They all get their back pay once criminal activities resume.

TalkToLind's picture

No, no, no! TPTB don't want the sheeple to know about a possible government shutdown yet; pull this story.  PULL IT!

TroyAndAbed's picture

"What exactly will you be cutting and how much of it and can I watch you do it while eating Pork Cracklins?"

-Ron Swanson

lester1's picture

GOP wants to refund planned parenthood..

Dems want to defend building the wall..


How do those things get negotiated?


A shutdown will happen!

Seasmoke's picture

You mean the government is still open. Could have fooled me. Stop sending the parasites your money.

Mr.Sono's picture

Let it burn. I think Trump is willing to do it. As long as bureaucrats  don't get paid, Ian cool with it. 

I am Jobe's picture

Go ahead shut er down. Thsi time without pay . No paying . Also fire CONgress.


Go ahead and shut down bloated State and City workers without pay. 

medium giraffe's picture

Zen Koan of the Day: If the government shuts down and no one notices, does it still matter a damn?

LawsofPhysics's picture

Well, the last time you still paid them.

aloha_snakbar's picture

If they did shut down, where would they go? To an intersection with a sign that says will lie, cheat, steal, murder and suck dick for food?

PT's picture

aloha_snackbar :  Ref Toxic Avenger 4 "will work for food" ...

Unfortunately I could not find the relevant video clip.  Then again, it is probably better that I didn't.  Quite a sicko movie, nowhere near as funny as the first one (and that was warped too).

yogibear's picture

Let's get something done and have a 100% shutdown.

No_More's picture

As long as the entitlements keep getting paid (welfare, SNAP, Medicaid, Medicare, Social Security, military pay, veterans pay, student loans/grants, etc) most Americans won't notice/care. It might eff up the national credit score if it goes on for a really long time (more than a few weeks) but frankly anyone extending the USA credit is already too crazy to hold purse strings or wants to lose money.

The goofy thing is Congress has like only 11-12 days to meet the deadline which is April 28th. Given how few legislative days are actually on a Congressional calendar anymore, all those Congress Critters tasked with doing something are way overpaid.

And at some point, if the impasse goes on longishly President Trump literally gets a line item veto, picking & choosing which bills get paid.

Am so glad my family is no longer getting anything from the fed gov (my father was a military retiree past 65 but died of dementia at the end of 2015) and that we live far enough away from the Ground Zero of Pointless Panic (the District of Corruption where there are tons of increasingly anxious fed gov employees sweating this yet again), that I'm pretty much okay with whatever the hell happens.

youngman's picture

Its kinda what I voted for..less goverment

There's picture

There is an Administration study underway to gage the feasability of building a wall to keep Russians out of the EU lands.

It will be less effective than the one for Canada and Mexico , but a great source of wealth for the Billonaire Club.

TalkToLind's picture

That's how they always sell a border wall to the sheep. One day people will realize that these walls are built to keep the tax slaves in.

az_patriot's picture

There's no such thing as a "government shutdown" -- this is all political theater.  "Non-essential" employees are furloughed for a few days, and those deemed essential are kept on the job to maintain critical operations.  To make it seem worse than it is, the media finds one or two things to crow about, such as the temporary closure of a national park, so the public perceives this as some sort of horrific thing.

Barrock's picture

Correct!  The only ones hurt are the small contractor employees.

Barrock's picture

The term "governent shutdown" is MSN propoganda.  Actually, the government goes into a "reduced operations" mode and the government employees are given a free paid vacation.  All essential services are continued.  Just needed to clear this up, thanks.

Fake Trump's picture

Talking Head again. 

Audit Fort Knox.

Phillyguy's picture

Many large corporations, like GE who receives $ billions from US taxpayers in military contracts don’t pay any federal income tax ( So Trump wants to give his wealthy supports more tax cuts, while the country has huge deficits and our government continues spending astronomic amounts of taxpayer money on the military and foreign wars. This is bankrupting the country.

Fed-up with being Sick and Tired's picture

I think that Trump is going to Choke [to death] on a Money Sandwich while leafing through a Mirror Catalog.

geeves's picture

If only the shutdown could be permanent...

Jack4952's picture

DEBT CEILING Limit Does NOT Cause Government Shutdown

I was prompted to write this brief essay to correct some misinformation in this article, the article “Watch These Geopolitical Flashpoints Carefully” by Brandon Smith of and reposted in on March 24, 2017 under the same title; and several other articles. (Source: ) I consider Brandon Smith to be an excellent political analyst and writer who deals in facts. However, in his latest post I believe he omitted an extremely vital fact of law.

“VITAL POINT Missed re: "Debt Ceiling Other FLASHPOINTS "
When the "debt ceiling" is reached, the government may NOT borrow additional money. But when the balance now in the Treasury is completely spent, the government does NOT "shut down"!!!!! (Another SCARE TACTIC !!!)


1.) Because the U.S. Treasury takes in SEVERAL HUNDRED BILLION dollars as taxes each MONTH. every month.

2.) Under the Constitution when the debt ceiling has been reached AND the government can NOT pay all it expenses, the PRESIDENT has the SOLE AUTHORITY to decide how available money is to be spent!!!! (This power has been utilized by previous presidents.)
(Sources: Doug Casey; Michael Pento; Catherine Austin Fitts; Clif High; Rod Kirby; Greg Hunter; and former Reagan Administration White House Budget Director DAVID STOCKMAN)

3.) Consequently, failure to increase the "debt ceiling" could be a BIG WIN for President Trump !!!!! Trump could fund whatever programs he wished and NOT fund others he disliked - and NO ONE could do a damn thing!

Sen. Chuckie Schumer and Treasury Secretary Steven Mnuchin (Goldman Sachs' "snake in the White House") are SCARED SHITLESS of Trump assuming this sole spending authority. They know their "pet" agencies and programs would be at risk.

For example, Trump has stated explicitly he would continue to fund Social Security, Medicaid, Medicare, salaries of military personnel. (Under the Constitution, he must pay the salaries of all federal judges; but interestingly he is NOT required to Congressional salaries!)

But Trump would NOT pay salaries of federal employees in many departments/agencies, as well as NOT pay for grants, contracts, etc. issued by these departments/agencies.

In short, Trump would have SOLE SPENDING AUTHORITY and thereby would be able to effectively "kill off" many agencies and programs WITHOUT input from Congress or the courts.


Several people have questioned the accuracy of my above statements. However, rather than wade through all my prior research, I will present a relevant article written by Andrew Kloster in October 2013.

“The President’s Legal Authority at the Debt Limit”
by Andrew Kloster, October 9, 2013 5 min read Download Report Note DATE of article: Oct 9, 2013

Andrew Kloster
Visiting Fellow

Some time between the middle and the end of October [2013], the federal government will reach a hard limit on the amount of debt it can issue, and its ability to finance governmental operations will be affected. Confusion about the debt limit abounds, and this Issue Brief will address some common questions.

What Is the Debt Limit?

The United States debt limit, or debt ceiling, is the statutorily defined amount of debt the U.S. Treasury can issue, either by borrowing from the public or issuing an intra-governmental receipt to special accounts, such as the Social Security or Medicare trust funds.[1]

The Treasury Department has to have liquidity, or cash on hand, to disburse the funds necessary to meet its contractual obligations. The federal government maintains this liquidity by managing governmental receipts (such as income tax payments) and selling debt (such as Treasury bonds).

[COMMENT BY John-Henry Hill: Despite all the rhetoric, reaching “debt limit” does NOT equate to a “government shutdown”. As stated two paragraphs below, “reaching the debt limit would NOT force a government shutdown.”]

Will a Government Shutdown Occur If the Debt Limit Is Not Raised?

The debt limit is often confused with the expiration of appropriations bills. Reaching the debt limit is distinct from a government shutdown. A government shutdown occurs when appropriations authorization expires: Unless there is a law saying that money may be spent on a project, money may not be spent on that project.[2] A debate over an appropriations bill is a debate over whether to fund a specific government function. When the government shutdown began, only certain statutorily defined “essential” government functions have continued to operate.[3]

The debate over the debt limit, however, is a debate over how to finance governmental operations—reaching the debt limit would not force a government shutdown. Currently, the debt limit is $16.699 trillion.[4] The federal government reached this limit on May 19, 2013, and Treasury has since used statutorily allowed “extraordinary measures” to avoid issuing additional debt and still have the cash on hand to finance day-to-day operations. When the Treasury exhausts these extraordinary measures, the federal government will continue operating. However, the President might decide that federal employees, for example, will not necessarily be issued checks available to cash immediately.

Even without the ability to issue additional debt, the government will continue to accrue legal obligations; it will simply not be able to immediately liquidate (pay cash for) those obligations.[5]

What Happens to the U.S. Debt If We Reach the Debt Limit?

It is impossible to tell what would happen if the debt limit is not raised.[6] If Congress and the President are unable to reach an agreement on raising the debt ceiling, markets and credit rating agencies might interpret this negatively as unwillingness of the U.S. government to honor its obligation. If the President chooses to default on all obligations rather than a few (discussed below), this could exacerbate the problem. Market perception of U.S. sovereign debt directly affects bond yields (interest rate paid) on U.S. debt, so decisions the President makes can actually save or cost the government money in the long term.

The Prompt Payment Act[7] provides that the “temporary unavailability of funds to make a timely payment” does not excuse delayed payment and that the government is responsible for paying interest charges on such delayed payments. Over time, these interest penalties capitalize, so the federal government ends up paying compound interest. Depending on how the President manages payments, statutory interest payments may be greater or smaller.

What Would the President Prioritize?

While there have been proposals to cabin the authority of the executive to prioritize payments,[8] as it stands there is no statute governing how to manage government finances past the debt limit. Since governmental obligations would exceed receipts, exceeding the debt limit logically implies that at least some obligations would be delayed. These obligations would thus, by definition, be in default. There is no general “governmental default” past the debt limit; default would occur with respect to specific obligations that the President chooses not to prioritize.

There are constitutional backstops on the President’s otherwise plenary authority to prioritize payments.[9] Of these, the most important is that the President may not prioritize payment in violation of the Due Process Clause of the Fifteenth Amendment. He may not, for example, choose to pay the salaries of federal employees of one race before paying the salaries of federal employees of another race. Subject to this limitation, the President’s prioritization choices are essentially unbounded.

The President could, of course, play a game of political brinksmanship and fail to pay any obligations until the debt ceiling is raised. He could argue that all obligations are on an equal footing and that prioritizing payments violates some principle of fairness. Former Treasury Secretary Timothy Geithner made statements about the political unworkability of prioritization in the past,[10] but to date, Treasury has not disavowed its legal authority in this area. Failing to prioritize debt obligations would have far-reaching consequences, however, including potentially increasing the cost of servicing the debt long after the debt limit crisis ends.

Further, to the extent that this situation would involve having cash on hand and failing to pay some receipts, this option implicates the Congressional Budget and Impoundment Act of 1974, which prevents the President from deferring any “budget authority.” This phrase is defined to include “borrowing authority, which means authority granted to a federal entity to borrow and obligate and expend the borrowed funds.”[11] Holding cash until such time that the Treasury can meet all of its payments necessarily includes deferring expenditures of borrowed funds until such time as the debt ceiling is raised, which would implicate these statutory limitations.[12]

The President could also choose to continue payments for “essential” services analogous to those defined in the appropriations context.[13] There is no statutory requirement for this decision, but the idea that there are “core” functions of the federal government that ought to remain liquid is easily understandable. Meeting debt obligations and paying military personnel might be prioritized at the expense of other obligations, such as issuing certain grants and loans to private-sector firms and to state and local governments, for example. So-called “mandatory spending”, such as Social Security payments, do continue during a government shutdown, but they need not be prioritized at the debt limit.[14]

The President could also pick and choose among programs he likes and those he does not like. He might direct Treasury to pay Department of Defense employees before Department of Education employees, or vice versa. Whatever decision he makes would be essentially unchallengable in court.

Ultimately, however the President chooses to manage payments, delays will accumulate and worsen until either spending is cut or the debt ceiling is raised.

Broad Authority

In brief, the President has broad authority to manage government payments to avoid defaulting on federal obligations. He can choose which payments to make and in which order, and these choices will impact the effects on the average U.S. taxpayer and the economy.

—Andrew Kloster is a Legal Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

[1]Mindy R. Levit et al., “Reaching the Debt Limit: Background and Potential Effects on Governmental Operations,” Congressional Research Service Report for Congress, September 19, 2013, (accessed October 9, 2013).
[2]31 U.S. Code § 1341.
[3]Hans von Spakovsky, “What Happens During a Government ‘Shutdown’?,” Heritage Foundation Issue Brief No. 4049, September 18, 2013,
[4]Budget Control Act of 2011, Public Law 112–25.
[5]If a federal employee were to sue to compel payment, there is no doubt that the federal government would be obliged to pay. The remedy for such a lawsuit would be payment but not necessarily immediate payment. See, cf., In re Barr Laboratories, 930 F.2d 72 (D.C. Cir. 1992).
[6]The federal government has “defaulted” on various obligations in the past. Technically, any time the government does not make a payment on time, even due to a clerical error, it has “defaulted” on that obligation. Perhaps the most applicable “default” occurred in 1979, when Treasury failed to make timely payments to holders of various Treasury bills. This default was minor, but because it involved the security of Treasury bills, it had lasting consequences. See Brady Dennis, “Delayed Payments in 1979 Offer Glimpse of Default Consequences,” The Washington Post, July 10, 2011, (accessed October 9, 2013). There are many other examples of federal default. See, e.g., George Chidi, “Error Delays Friday the 13th Paycheck for 40,000 Federal Workers,” The Raw Story, September 14, 2013, (accessed October 9, 2013). Errors such as these have no market effects, because they do not implicate U.S. public debt. Routine failure of this kind could, however, rankle investors and implicate U.S. borrowing power.
[7]31 U.S. Code § 3902.
[8]The Full Faith and Credit Act of 2013 (H.R. 807), which seeks to pay bondholders and Social Security beneficiaries even past the debt limit, has passed the House but is not a priority in the Senate. Furthermore, the President has indicated he would veto the bill.
[9]There are a variety of potentially applicable constitutional provisions. Article II, Section I of the Constitution provides that the President’s salary “shall neither be increased nor diminished during the Period for which he shall have been elected.” Article III, Section I provides that “judges, both of the supreme and inferior Courts…shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.” [Note that Congress’s salaries are NOT similarly protected or guaranteed by the Constitution.] These two provisions might be interpreted to mean that the President must prioritize payment of these constitutional officers. In addition, Section 4 of the Fourteenth Amendment provides, “The validity of the public debt of the United States…shall not be questioned.” Strictly speaking, this provision is not germane to what happens beyond the debt limit, since the relevant statute only limits the creation of additional public debt rather than dissolving previous debt.
[10]U.S. Department of the Treasury, letter of Secretary Geithner to the Senate Majority Leader, January 6, 2011, (accessed October 9, 2013).
[11]2 U.S. Code § 684; 2 U.S. Code § 622 (emphasis added).
[12]If the President decided to prioritize a major program and needed to withhold receipts temporarily in order to provide a liquidity “cushion” and avoid defaulting on that particular obligation, he would be on stronger footing, since the purpose would be meeting rather than avoiding appropriations obligations.
[13]31 U.S. Code § 1342.
[14]While the President is not compelled to prioritize Social Security payments, he is certainly not compelled to not pay Social Security payments. President Obama has, however, made statements that he believes he will be forced to delay Social Security checks, which is flatly untrue. See Romina Boccia, “Obama Needlessly Scares Seniors: Social Security Checks and the Debt Limit,” The Heritage Foundation, The Foundry, October 7, 2013,

JailBanksters's picture

Who thinks Politicans are still going to show up for work and NOT get paid ?

These are the same Politicians that have to approve more debt is betterer.