Aug 24, 2017

Government shutdown chances rising by the day

Carolyn Kaster / AP

Top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall. Trump is dead serious about this fight, a senior administration source tells us, and the president's talk is starting to spook markets.

  • Goldman Sachs, in guidance to investors last Friday, pegged the odds at 50/50. This strikes us as high, but the dynamics are ominous:
  • A top Republican source put the chance as high as 75%: "The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not."
  • This may all come down to Trump's mood: The president is spoiling for a fight and the [conservative House] Freedom Caucus haven't had a fight for a while. That's a dangerous dynamic.

Based on funding mechanisms, the showdown could come either in September or December — or both:

  • Officials at both ends of Pennsylvania Avenue who are up to their necks in tax reform think passage probably doesn't happen until early next year.
  • So a September shutdown could be better for tax reform than a Christmas shutdown, because it would allow conservatives and Trump to get it out of their system.

Democrats feel certain they have Trump boxed in, and see no reason to compromise/help:

  • Trump is at war with Senate Leader McConnell and several other Republicans, complicating communications and compromising trust.
  • Congressional leadership doesn't want a shutdown and can pass the fall bare necessities — continuing resolution / debt ceiling / Children's Health Insurance Program extension — using mostly Democratic votes.
  • But the Freedom Caucus will hammer Speaker Ryan for doing so, and conservatives in the Senate will hammer Leader McConnell.

Be smart: With the departure of Steve Bannon, Trump is surrounded more and more by conventional/mainstream folks, which could actually make him feel more compelled to buck them.

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