Goldman Sachs experiences unlikely year-end government shutdown

(MENAFN) An analysis by Goldman Sachs, released on Monday, indicates that a government shutdown before the end of the year is improbable, though it remains a possibility in the early part of the following year. This assessment is influenced by the prospect that lawmakers might opt for a short-term funding bill. Earlier, economists at Goldman Sachs had anticipated a two- to three-week shutdown in this quarter, aligned with the November 17 funding deadline set by Congress. However, the new analysis shifts expectations, deeming a shutdown this year unlikely.

The economists at Goldman Sachs attribute this change in outlook to Congress contending with pressing geopolitical challenges and the recent change in House leadership, with Republicans electing Speaker Mike Johnson, a representative from Louisiana. The report from Goldman Sachs notes, "With new geopolitical risks and a new House Speaker, Congress now looks likely to avoid a government shutdown altogether this year." Consequently, the economists have removed any assumption of a shutdown from their forecast. In response to this and other factors affecting the GDP forecast, they have revised their estimates, boosting the Q4 GDP growth projection to +1.6 percent and lowering the 2024 Q1 estimate to +1.7 percent.

The impending deadline facing Congress is November 17, by which they must pass legislation to fund the government, failing which a partial shutdown would commence over that weekend. Speaker Mike Johnson has indicated his support for a stopgap continuing resolution (CR) that would provide funding until either January 15 or April 15 of the next year, contingent on which option garners more support among House Republicans. Johnson emphasized the significance of reaching an agreement on government funding, stating it as his "top priority."

The duration of the CR will hinge on the precarious majority held by House GOP, which can only tolerate four defections while still passing legislation along party lines. This presents challenges not only with government funding bills but also with anticipated aid packages for Israel and Ukraine. The ability of a handful of holdout members to complicate matters for House leaders was previously demonstrated when eight GOP members ousted former Speaker Kevin McCarthy, resulting in a 22-day effort to fill the leadership vacuum, concluding with Johnson's election.

The report from Goldman Sachs underscores that the longer the government operates under short-term extensions, the less likely it becomes that Congress will reach an agreement on full-year spending bills that would fund the government through the end of the fiscal year, concluding on September 30, 2024.

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