Goldman Sachs Warns of U.S. Government Shutdown Risk
Goldman Sachs highlighted the escalating risk of a U.S. government shutdown following the House of Representatives' rejection of a revised spending package and debt limit suspension.
The spending bill failed with a vote of 174-235, where 38 Republicans opposed it and only two Democrats supported it. As the current funding is set to expire at midnight on December 20, Goldman Sachs indicated that the chances of missing this deadline have grown.
The rejected bill included a debt limit suspension until January 30, 2027, which Goldman Sachs identified as a critical issue. The analysts noted, "The revised package that failed to pass included a 2-year debt limit suspension (until Jan. 30, 2027). While this was one of many changes from the prior bipartisan agreement, it was likely the primary reason the bill failed."
Unless Republican lawmakers who opposed the bill change their minds, the insistence of President-elect Donald Trump on including a debt-limit suspension may complicate efforts to avert a shutdown.
Goldman Sachs, however, remains cautiously optimistic, stating, "Congress has managed to pass last-minute extensions before, and the upcoming recess is likely to motivate lawmakers to reach a deal soon." They also mentioned, "A protracted shutdown still appears unlikely."
The bank outlined two possible paths ahead: Congress could either pass a short-term spending extension, postponing the debt-limit discussion, or Republicans might negotiate with Democrats to raise the debt limit in exchange for new policy concessions.
Despite the debt limit technically being reinstated on January 2, 2025, Goldman Sachs estimates that the Treasury will have adequate resources to meet its obligations until the third quarter of next year.
"We continue to think a protracted shutdown will be avoided," the bank concluded.
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