Why government shutdown odds are spiking: Both parties see some upside

Economic

Summary:

Government shutdown odds are rising as both Republicans and Democrats see political benefit in a stoppage. With talks stalled, Trump pushing mass firings, and neither side willing to yield, markets brace for Oct. 1.

The growing sense in Washington is that the latest government funding fight between Republicans and Democrats is shaping up differently.

And why things may be more likely to end in a shutdown is simple: Not only are both parties OK with a funding stoppage, but some partisans even view the idea of going through with it as an opportunity or political necessity.

Markets, meanwhile, have grown accustomed to tuning out Washington's regular displays of brinksmanship. But Wall Street may turn to the issue in earnest starting Monday, when lawmakers return with less than 48 hours before a partial government shutdown could take effect on Oct. 1 at 12:01 a.m. ET.

The latest example of how the current funding fight is playing out differently — with political pressure seeming to push in the direction of shutdown — came late on Wednesday when President Trump's White House asked federal agencies to consider mass firings as part of their shutdown planning efforts.

It's a way for Trump's team to accomplish previously unrelated goals — those often expressed by the Department of Government Efficiency (DOGE) — in a different manner, with the memo saying firings could be focused on areas "not consistent with the president's priorities."

It was also a move intended to increase the pressure on Democrats.

Whether it causes Senate Majority Leader Chuck Schumer and others to blink remains to be seen, but the new threat is just one factor Democrats are weighing, as they often note a shutdown as one of their vanishingly few points of leverage.

Party leaders are also answerable to a Democratic base that appears to be fine with a shutdown — especially if the only alternative is seen as "bending the knee" to Trump.

Washington being Washington, an abrupt end to the standoff is always possible. But the increased odds are a sign that more and more people, both in Washington and on Wall Street, are beginning to believe Schumer when he says, as he told reporters recently in reference to the last standoff, "The world is totally changed from March."

As Signum Global Advisors recently noted to clients, "Our base case has, and continues to be, that the government will shut down on October 1." Others are offering a similar scenario, with above-even odds for the time being that Wednesday dawns with government offices closed.

A hard-line stance from both sides

Trump has slammed Democrats, saying they will be to blame, but the president has evinced little public concern about whether he would be hurt by a stoppage — saying at one point, "We could very well end up with a closed country for a period of time."

The president also abruptly canceled a meeting with Democrats this past week that had been seen as one of the few avenues to a deal. Trump said that "no meeting ... could possibly be productive."

That hard-line stance from Trump — which is being echoed across his party — comes as Democrats appear caught between having no audience for their demands and a base of voters who view capitulating to Republicans as the worst possible outcome.

A recent survey from the progressive firm Data for Progress found that seven out of 10 Democrats support the idea of their party leaders voting for a shutdown unless Republicans make concessions.

Also front of mind for Democrats is how the most recent standoff in March ended in anticlimactic fashion when Schumer dropped many of his demands at the last minute and rallied moderate Democrats to vote to keep the government open.

It has forced Schumer to make amends with his left flank, to mixed results so far.

For the moment, there appears to be little means to a conclusion short of a capitulation by one side or the other.

Last week saw the failure of party-line plans in the Senate on both sides.

The Republicans offered a plan to keep the government open until Nov. 21 with minimal other changes. A Democratic plan aimed to do the same but added some party priorities, such as reversing recent healthcare cuts enacted by Republicans.

Both bills failed to reach the required 60 votes to advance.

That left limited options to avert a stoppage — even more limited now after the meeting between Trump and Democrats was canceled — leaving both sides most focused at the moment on convincing voters that any shutdown will be the other side's fault.

As Trump said when he canceled the planned meeting with Democrats, the only way he'll meet with them is if they "become realistic." Democrats shot back that it's the president who is "barreling the country toward a painful government shutdown."

Source: finance.yahoo

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Why government shutdown odds are spiking: Both parties see some upside

Source: finance.yahoo

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