Market Timing

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>>> Washington may be looking at another fiscal crisis: a government shutdown.


MarketWatch

June 17, 2023

By Robert Schroeder


https://www.marketwatch.com/story/government-shutdown-fears-are-growing-heres-what-to-watch-and-when-to-expect-trouble-de0f245


‘We have to be serious about spending,’ says House Republican

Fresh off the debt-ceiling showdown, Washington may be looking at another fiscal crisis: a government shutdown.

At issue is a decision by House Republicans to write spending bills below the levels set in the recent deal that resolved the debt-ceiling crisis. Such bills, which fund various government operations, must be approved before the start of fiscal 2024 on Oct. 1. Without passage, Americans can expect another round of interrupted services, shuttered national parks and furloughed federal workers.

“If Congress does not pass all 12 appropriations bills by the start of FY24 on October 1st, there’s a chance that a government shutdown could result, just in time to commemorate the 10-year anniversary of the October 2013 shutdown, which occurred under a Republican House, Democratic Senate, and Democratic White House,” said Beacon Policy Advisors in a note.

Greg Valliere, chief U.S. policy strategist at AGF Investments, wrote that a stalemate between the House and Senate “could easily lead to a government shutdown as the new fiscal year begins on Oct. 1, and key spending provisions — defense and health care in particular — could stall in early October.”

The debt-ceiling legislation negotiated between House Speaker Kevin McCarthy and President Joe Biden set spending levels over the next two years, keeping nonmilitary spending for 2024 the same as 2023 levels. But House Republicans this week adopted spending targets for the coming fiscal year at levels below the McCarthy-Biden agreement.

Hardline House conservatives’ aims could set a collision course with the Democratic-controlled Senate, as well as further turn up pressure on McCarthy from his right.

“I’m not afraid of shutdowns,” Rep. Byron Donalds, a Florida Republican, told Punchbowl News. “American life doesn’t halt because government offices are closed…We have to be serious about spending.”

Beacon said preventing a shutdown on Oct. 1 would require lawmakers to agree on a stopgap budget known as a continuing resolution to keep the government open. But even such a solution could be fraught, they noted.

“Traditionally, CRs are passed at the previous year’s funding level, but it’s unclear if the right flank of…McCarthy’s (R-CA) conference would go along with a CR at FY23 levels.”

Historical data has shown that extended federal government shutdowns actually overlapped with bigger gains for stocks. Stocks climbed almost 2.9% on average when closures lasted for 15 or more days, as MarketWatch has written.

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