Government shutdown: Analysts warn of ‘perhaps a long one lasting into the winter’

This won’t be like the short shutdowns that didn’t faze markets, one analyst cautions

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A divided?Washington keeps looking like it will deliver a partial government shutdown, and analysts are sounding more concerned about it this week.

Infighting among House Republicans over a short-term funding proposal has contributed to those worries.

“This gridlock means a partial government shutdown is very likely,” Greg Valliere, chief U.S. policy strategist at AGF Investments, said in a note on Tuesday. He wrote that he sees a “70% chance of a shutdown, perhaps a long one lasting into the winter.”

Leaders from two House GOP groups — the Main Street Caucus and the House Freedom Caucus — announced an agreement Sunday on a short-term bill, known as a continuing resolution or CR. But some Freedom Caucus members then voiced objections, spelling trouble for the measure given the slim Republican majority in the chamber.

Other analysts are also warning about the potential for a lengthy shutdown after Sept. 30, when the federal government’s?fiscal year starts.

“If there is a shutdown on Oct. 1, it could be quite long as there is not an action-forcing policy catalyst that would force lawmakers to find some common ground & pass a funding measure,” said TD Cowen Washington Research Group’s?Chris Krueger in a note. “The only politically sensitive deadline is Oct. 13, when paychecks are due to the uniformed military.”

A couple of weeks ago, some analysts said a closure could be short-lived and not a risk for markets, but Terry Haines, founder of Pangaea Policy, said earlier this week that he expects the current funding standoff “won’t be at all like the one-off short ‘shutdowns’ to which markets have become accustomed and had no impact on markets SPX or GDP,” meaning gross domestic product.

Haines said the current impasse “will take months to resolve” because it involves defense ITA spending, as well as spending on Ukraine and security at the southern U.S. border, and it’s made worse because neither chamber of Congress advanced spending bills as quickly as envisioned in this past spring’s debt-ceiling deal.

See: Biden says Ukraine must not be ‘carved up,’ as Republicans challenge funding for that nation’s war vs. Russia

Also: Kevin McCarthy’s near-impossible task: to get Republicans on the same page and fund the government for another month

Even if the Republican-run House is able to advance a short-term spending bill, it is viewed as dead on arrival in the Democratic-controlled Senate due to provisions that would cut some spending by 8%. Senate Majority Leader Chuck Schumer, a New York Democrat, said in a floor speech on Tuesday?that “the GOP’s proposed CR is a nonstarter here in the Senate.”

Now read: U.S. government shutdown: Here’s how a partial closure would affect you

From MarketWatch’s archives (January 2019):?The latest government shutdown is ending, after becoming the longest on record — by a wide margin