Goldman Sachs on Monday released an analysis finding that a government shutdown before the end of the year is unlikely — although it remains a possibility early next year, given that lawmakers may opt for a short-term funding bill.
Economists at Goldman Sachs were previously forecasting a two- to three-week shutdown in this quarter, during which Congress’ current Nov. 17 funding deadline falls. They now see a shutdown this year as unlikely due to Congress grappling with geopolitical challenges and the new leadership in the House of Representatives after Republicans elected Speaker Mike Johnson, R-La.
"With new geopolitical risks and a new House Speaker, Congress now looks likely to avoid a government shutdown altogether this year," the Goldman Sachs economists wrote.
"For now, we are removing any shutdown assumption from our forecast," the economists added. "Coupled with other changes to our GDP forecast caused by data released this morning, we have boosted our Q4 GDP growth estimate to +1.6% and lowered our 2024Q1 estimate to +1.7%. "
Congress faces a funding deadline of Nov. 17 to pass legislation funding the government or else a partial shutdown will begin that weekend.
Recently elected House Speaker Mike Johnson, R-La., has indicated he would back a stopgap continuing resolution (CR) providing funding until Jan. 15 or April 15 of next year, depending on which gets more support from House Republicans. Johnson said Sunday on FOX News’ "Sunday Morning Futures" that reaching an agreement on government funding is his "top priority."
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The duration of the CR will depend on the House GOP’s threadbare majority, which can only afford four defections while still passing legislation along party lines — issues that could arise with government funding bills as well as anticipated aid packages for Israel and Ukraine.
The ability of a handful of holdouts to complicate matters for House leaders was demonstrated by eight GOP members’ ouster of former Speaker Kevin McCarthy, R-Calif., which spurred the 22-day scramble to fill the leadership void that concluded with Johnson’s election.
The Goldman Sachs economists noted that the "longer the government operates under short-term extensions, the less likely it will be that Congress will reach a deal on full-year spending bills" that would fund the government through the end of the fiscal year, which ends Sept. 30, 2024.
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Not enacting full-year spending bills would make it difficult for lawmakers to implement the bipartisan budget cap agreement, known as the Fiscal Responsibility Act, that was enacted earlier this year. The deal involved raising the debt limit until January 2025 in exchange for $1.5 trillion in deficit reduction over a decade.
