Government Shutdown Odds Are Rising, Goldman Warns

Tyler Durden's picture

Having been quite confident that Trump would be able to pass some form of Tax reform as recently as two weeks ago, Goldman's Washington analyst, Alec Phillips, is turning increasingly more pessimistic on the prospects that Trump's economic agenda will gain traction in Congress, especially now that attention has seemingly shifted to Trump's bombing policies in Syria (and perhaps North Korea in the not too distant future).

In a note over the weekend, the Goldman strategist writes that "following the failure to pass the American Health Care Act (AHCA), which would repeal the Medicaid expansion and tax hikes enacted in the Affordable Care Act (ACA) and reduce the tax subsidies for health insurance under that law, Republican leaders in the House have struggled to develop an alternative health proposal that might find enough support to pass. At this point, it still appears possible that the House could pass a revised version of the bill at some point in May. However, the compromises that might be made in the House to gain support are apt to reduce support in the Senate, and the process in that chamber would take much longer than even the drawn out House process, in our view."

He also observes that lawmakers and market participants have refocused their attention on tax reform, "though a number of other issues are likely to delay activity on tax legislation for another several weeks." This includes another potential attempt to pass health legislation, the possibility of a government shutdown, a debt limit deadline later this year, and geopolitical developments.

Which brings us to the key topc: the prospect of a government shutdown in less than three weeks. This is what Phillips says when discussing the risks of a government shutdown on April 29.

Congressional appropriations expire April 28. If Congress does not pass an extension, the federal government will partially shut down. The economic consequences of a short shutdown are minor, since lost federal pay is usually made up retroactively and government procurement and private sector activity would be largely unaffected.


However, a shutdown would send  another signal to markets that Republicans may not be able to enact their agenda, lowering expectations for tax reform and an infrastructure program.

We believe Congress is more likely to meet the deadline, but see a one in three chance of a shutdown.


The “freedom caucus” in the House may be unwilling to vote for a spending bill, denying Republicans a majority without Democratic votes. However, Democrats might be unwilling to provide those votes as they often have in the past, in light of the decision to change Senate rules to confirm Neil Gorsuch to the Supreme Court over Democratic opposition.


That said, there is not yet a clear issue Democrats are likely to point to in defense of a shutdown, as Republicans did in the 2013 shutdown when they demanded that Obamacare be defunded. If such an issue emerges—Republican leaders have already indicated they plan to keep funding for the border wall out of the bill to avoid such an issue—then the odds of a shutdown would rise considerably.

Amusingly, Goldman observes that Trump's escalation of the Syrian conflict may actually be a positive factor, reducing the odds of a shutdown.

We also note that a shutdown might be slightly less likely in light of the conflict with Syria, since a failure to extend spending authority would affect the Department of Defense in addition to domestic agencies, and some lawmakers might support the spending bill for that reason.

So now that even Goldman admits that the odds of a government shutdown are rising (two weeks ago Deutsche Bank calculated that government shutdown odds had risen to a roughly similar 40%), here is what readers "need to know" about the threat of a potential government shutdown according to Bloomberg:

  • As Congress works to fund the government for the second half of FY2017, investors are weighing the possibility of a partial government shutdown if lawmakers fail to reach an agreement by April 28.
  • President Trump has asked for about $30b in emergency spending for defense, along with $18b in cuts to non-defense spending
  • Oklahoma Rep. Tom Cole said appropriations will ignore the $18b in cuts as they negotiate the omnibus bill and a supplemental
  • Gridlock in Washington could slow pro-business reforms so much that markets would “effectively price them out,” BMO strategists Ian Lyngen and Aaron Kohli wrote March 28; they said a government shutdown would be bullish for USTs, risk- off assets


  • The second continuing resolution for the FY2017 budget expires April 28; Congress needs to pass a spending bill or continuing resolution (CR) to fund the government for the second half of the FY
  • Congress passed the first CR Sept. 28, which extended funding at previous year’s levels through Dec. 9. Congress is in recess starting this week and returns the week of April 24, leaving just 4 days to cobble a deal.


  • A (partial) government shutdown along lines of 2013; federal government workers are furloughed if their agency is part of the annual appropriations process, according to the U.S. Office of Personnel Management
  • During the 2013 shutdown, some government economic data releases were postponed and rescheduled
  • The October jobs report was delayed until Nov. 8 due to the 16-day impasse in 2013. The report was originally slated for Nov. 1
  • The Fed, which isn’t funded via congressional appropriations, released meeting minutes as scheduled during the 2013 shutdown


  • Debt ceiling is a non-issue; since Treasury reinstated the debt limit on March 15, it has employed extraordinary measures to extend its borrowing authority through September/October
  • In 2013, the debt ceiling drop-dead date coincided with the shutdown, which created more uncertainty


  • TD strategists led by Priya Misra suggest a government shutdown may be negative for risk assets as it’s likely markets would price in lower odds of tax reforms being enacted in 2017
  • In September 2013, equities dropped heading into the shutdown, then rose when a resolution appeared imminent.
  • Spending negotiations “may bring continued volatility,” but unlikely to drive UST gains as odds of a shutdown are low, JPMorgan strategists led by Jay Barry said in March 29 note.
  • 10Y yields fell by about 37bps to 2.62% in the month leading up to the 2013 shutdown, then rose to 2.73% by Oct. 15.
  • Treasury bills may react more to cut in seasonal supply after the tax deadline, not the shutdown, Nomura strategists led by George Goncalves said March 31
  • Rates on 1-month securities surged to 0.36%, then the highest levels since the financial crisis.

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logicalman's picture

Could this be made permanent?


Looney's picture


If someone disagrees with what Saudi Arabia wants us to do in Syria, we launch the Tomahawks.

If someone disagrees with us on North Korea, we send a Carrier Strike Group to their shores.

If someone (the Freedom Caucus, Rand Paul) dares to disagree with RyanCare or the tax reform, or on the Debt Ceiling are they gonna get Tomahawked, too?


Looney's picture


... dares to disagree with RyanCare

Actually, fuck that shit – it is NOT RyanCare, it is TrumpCare.

Nancy was the juggernaut who pushed 0bamaCare through, but it wasn’t named after her - PelosiCare.

So, Donald, man the fuck up and own it, you lying sack of shit!


bamawatson's picture


Poopy's picture
Poopy (not verified) bamawatson Apr 9, 2017 11:29 AM

Anyone else buying up platinum. Got 10 Valcambi suisse @ $947 last week. Hoping the price gets jewed down some more.

ares_xtreme's picture

No they won't shut down. Trumpo is now propped by the neocons. They will all be happy to push his agenda as long as they get their wars.

How can he sink so low you ask? Well, was enough one bad advice from the jew-in-law and now he's like a pig in shit in the swamp

VIDEO: Trump Considering Sanctions Against Russia and Iran Over Syria – US Envoy to UN


Déjà view's picture

Start with DOA...Dept. Of 'Offense'...

Dyler_Turden's picture

Senate Majority Whip John Cornyn asserted there would not be a government shutdown during a Sunday interview on Fox and Friends. 

Neocons are warching Trump's  ass now and they love it.


Bromance a la Swamp

fx's picture

Govt shutdown? So, lots of former Goldman folks will soon be getting paid for doing nothing? Where's the news?

Dyler_Turden's picture

The Swamp is lovely this time of year.

king leon's picture

Trump sanctions Russia,Syria,Iran. Won't send anymore Tomahawks for target practice.

Luc X. Ifer's picture

Not going to happen if US will be officially at war

Maybe this is the whole purpose of this kabuki, finding the last ground

to continue the Ponzi


Invinciblehandaxe's picture

a nuclear war will easily solve that

divingengineer's picture

We could take a few hits and survive.
Probably just be dem strongholds anyway.
Could NKor take a hit to Pyongyang and go on?
Doubt it.
THAAD has probably pulled their teeth.
Next time they launch we should intercept it and that would change the game dramatically.
Tired of hearing threats from those little fucks.

Anteater's picture

It's just a GD paid vacation for them! It's a ploy to jack the Debt-Ceiling to $30 trillion.

Trump will PRETEND that he's going to Drain the Swamp, and Congress will PRETEND

they aren't going to raise the Debt Ceiling, they will let everything turn to SHIT and let

the US Media WATERBOARD all of US how we have 'NO CHOICE', then Trump will say

we have a 'crISIS' in Government, Congress will  jack the Debt-Ceiling to $30 trillion,

then every Mil.Gov employee will get FULL BACK PAY and a COLA ON THEIR PENSION.

"And that's the Chicago Way!"

divingengineer's picture

No choice, know why?
They got no backup plan.
He'll, they got no primary plan.

"Plan? There ain't no plan!" - Pig Killer, Mad Max Beyond Thunderdome.

FreeShitter's picture

Dont worry the can will be kicked further down the road.

wmbz's picture

Yep, same old shit, different day! Actions of the insane.

I would prefer a whole host of retarded monkeys running the show. It would be far more entertaining, with better results.

Miss Informed's picture

Less shit would get thrown around too.

Looney's picture


The can was kicked to the shoulder a long time ago.  ;-)


DingleBarryObummer's picture

we need money for the poor, innocent, beautiful, poor, innocent, beautiful little babies, ripped out of the womb

Anteater's picture

No, we need money for the beautiful, beautiful little Tomohawks, ripping out of the Tomb

Déjà view's picture

Mr.T stated he wanted an increase in Dept. Of Offense spending...electorate should have been well aware of his support for AIPAC/ISISrael...WELL BEFORE 2016 ELECTION...

Probably the reason Mr.T became real quiet about NATO...figured he needs those Euro P ons as lackeys...

Reap what you sow...

Coming 20/20 election HINDSIGHT...sure bet electorate will fall for RED or BLUE PILL...same as it ever was! 


Will the missile strikes get shut down as well? //

GooseShtepping Moron's picture

For argument’s sake, let’s assume that Black Pigeon’s analysis is correct. I’ve seen a lot of other people around the internet saying essentially the same thing, viz. that this missile attack on Syria was meant to placate the neocons, strike fear into the hearts of Iran and North Korea, dispel any notions of Russian collusion, and distract the public from Trump’s domestic policy inaction.

If anything, that’s worse than the other plausible narrative being circulated, that Trump is an emotionally unstable sellout. When did any of these things become an acceptable reason for bombing a third party who had nothing to do with any of it? It angers me that some Trump supporters would be willing to write this all off as a necessary game of N-dimensional chess. When you add on the fact that the original gas attack was pretty clearly a false flag, then this whole episode seems atrocious.

I am reminded of Trump’s first campaign video spot. The one that showed a mushroom cloud and a clip of a laughing Vladimir Putin. The same one that Trump quickly took down once the Alt-Right made it clear that they were not interested in campaign messaging demonizing Putin, because we actually like the guy. But a missile attack cannot simply be taken back. Real people are dead now.

If Trump wanted to send a message, he should have drawn the real “red line” of American nationalism by steadfastly refusing to do anything. He should have made it clear that America will no longer intervene militarily in foreign countries on the flimsiest of pretexts. The ultimate casualty here is Trump’s credibility. Whether he is emotionally unstable or playing bloody chess games, he can no longer be trusted.


There is a story, possibly an apocryphal one, involving Beethoven’s 3rd Symphony Eroica, which the composer had written in honor of Napoleon Bonaparte. Upon learning that Napoleon had proclaimed himself Emperor, Beethoven is said to have flown into a rage and either torn out the title page or scratched out the dedication. Here is how Wikipedia records it.

 In writing this symphony, Beethoven had been thinking of Buonaparte, but Buonaparte while he was First Consul. At that time Beethoven had the highest esteem for him, and compared him to the greatest consuls of Ancient Rome. Not only I, but many of Beethoven’s closer friends, saw this symphony on his table, beautifully copied in manuscript, with the word “Buonaparte” inscribed at the very top of the title-page and “Ludwig van Beethoven” at the very bottom …


I was the first to tell him the news that Buonaparte had declared himself Emperor, whereupon he broke into a rage and exclaimed, “So he is no more than a common mortal! Now, too, he will tread under foot all the rights of Man, indulge only his ambition; now he will think himself superior to all men, become a tyrant!” Beethoven went to the table, seized the top of the title-page, tore it in half and threw it on the floor. The page had to be recopied, and it was only now that the symphony received the title Sinfonia eroica.

I rather doubt the veracity of this romanticized version of the story, and of course today the roles are reversed, with Alt-Righters being aligned rather with the Ancien Regime than the French Revolution, but this is exactly how all of Trump’s true-blue nationalist supporters feel after the Syrian missile strike.

mavenson's picture

Every story about Beethoven seems to have him getting pissed and throwing something across the room. Relevant/interesting though thanks.

AustrianJim's picture

Wouldn't a government shutdown be a good thing?

chunga's picture

Hands down, it would be the best possible thing that could happen.

Deep Snorkeler's picture

"The US educational system has collapsed

and we concede failure.

Americans are just too difficult to educate."

-President Ivanka Bannon, 2018

scoutshonor's picture

Hopefully they get shut down before they kill us all.

nachochan's picture

It is a pretty simple solution for democrats, if they are willing to poke the eyes of their corporate masters.  Shutdown the government on the basis of unauthorized use of force in the Middle East.  Join the freedom caucus in condeming warmongering and you have your solution/politcal cover to shut it down.  Unfortunately the democrats are supplicants to their corporate masters and won't do this. Even if they do it will only be temporary and for show/political theatre because they have no ideological soul like the freedom caucus does.  

red1chief's picture

"Government shutdown"? What a non-event joke, just an opportunity for politician posturing. 

Squid Viscous's picture

just dont shut the Pentagram, we have more wars to fight for Israel...

0valueleft's picture

Goldman is the goverment.

brain_glitch's picture

Exactly! you beat me to it btw

Silver Savior's picture

They do shuffle aluminum from Warehouse to Warehouse and somehow make money off that like a gov would.

0valueleft's picture

Ahh, Miss Masters old gig, before she was put on the destruction of Bitcoin. More of a JP thing, but still a branch of our goverment.

moneybots's picture

"Debt ceiling is a non-issue; since Treasury reinstated the debt limit on March 15, it has employed extraordinary measures to extend its borrowing authority through September/October"


Then why is there a debt ceiling in the first place? All they ever do is raise it anyway.

king leon's picture

Has any one ever bothered asking why they have never tried lowering it. maybe just let off a few less bombs every week.

SilvaDolla's picture

Here's to hoping the motherfucker DOES shut down. No one here even notices when it happens and the people of Syria would find instant relief when their neighbors and loved ones stop exploding. ;-P

pc_babe's picture

Whats the big deal? Its Sunday afternoon. They are closed now. They close every weekend, holidays and even in-climate weather is predicted.

Shut it down. It means they arent creating anymore laws, increasing taxes or making new rule and regulations from which they like to exempt themselves

Soul Glow's picture

Trump is going to start WWIII to mask the fact that he and Congress can't ge shit done.

Silver Savior's picture

I fully agree. I hedge against his shit with the shiny! He's not getting shit done, he is not draining shit, he is just there.

Consuelo's picture




  • Debt ceiling is a non-issue; since Treasury reinstated the debt limit on March 15, it has employed extraordinary measures to extend its borrowing authority through September/October"



Yeah...  What about it...?   March 15th came & went.   April & June 'lines-in-the-sand' will come & go too.   At this point, I don't know if David Stockman has enough spare parts in his garage to cobble together a scenario scary enough to float his credibility one last time...

Sorry David.   Ultimately, you're going to be proven correct, but first you'll be proven a Crank...  



TheAntiProgressive's picture

Here we go again......  Great, shut the damn thing down and leave it down for like 3 months.  That should allow our representative government leaders a real chance to face the voters.  We don't need any more new laws or post office names or whatever.  SS, welfare, FS is all on autopilot anyhow.  They don't need "the government" to keep printing checks and mailing them.  Shut it down and use the term layoffs, so we don't have to debate "furloughs".  Go home, no payola for a bit.  Give us all a break.  Sign up for Obamacare.

coast1's picture

government shutdowns...

military going to syria and north korea.

pissing off china and russia...

20+ trillion in debt...

trump losing his support...

over one trillion in student debt....many are defaulting...

over one trillion in car loans...defaults are up...

over one trillion in credit card debt...defaults are up...

maintream media loing credibility....

I could do this all day long.....