Congress Heads Out For Vacation As Government Shutdown Looms

Monday, April 10, 2017
By Paul Martin

by Tyler Durden
Apr 10, 2017

Members of Congress have headed back to their districts for a two-week recess after one of the most bitterly divided sessions in history that culminated with Republicans launching the ‘nuclear option’ to confirm Supreme Court Justice Neil Gorsuch. Unfortunately, upon their return to Washington DC, they will have just 5 days to unveil, debate and pass a spending bill, or trigger a government shutdown on April 28.

And while government shut downs have happened before with little economic consequence, as Goldman warns, failure to pass a budget this time around could have broader implications regarding the Trump administration’s ability to implement some of his key policy initiatives like tax reform and healthcare…issues which have clearly helped boost equity markets to all-time highs.

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.

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