Ten Key Themes as a Chaotic Weekend Looms
Author: Greg Valliere
September 29, 2023
1. Immigration and the porous border have emerged as a key issue; if both parties can agree to reforms, there could be a temporary budget extension, lasting until mid-November.
2. Aid to Ukraine is another major factor, and it could block passage of a budget compromise in the Senate, which will insist on more funding now.
3. The political issue is clear — House radicals want to fire Speaker Kevin McCarthy, who they view as insufficiently conservative. He could be ousted within days.
4. The economy could withstand a brief shutdown, but if this drags well into October, it will become a headwind.
5. The credit rating agencies are paying close attention to the dysfunction; Moody’s has made it clear that a downgrade looms.
6. Important economic data — beginning with next Friday’s jobs report — may lapse, just as the Federal Reserve considers another rate hike before the holidays.
7. We think there’s a 75% chance of a shutdown; if there’s no compromise by Sunday morning, this could last for weeks.
8. As House Republicans fight furiously with each other, the GOP will get the blame for a shutdown. They always do.
9. President Biden and the Democrats are content to watch the House brawling, but eventually they will be part of a final deal.
10. When the dust eventually settles, fiscal policy will look a little tighter than it is now but the annual budget deficit — which has ignited this fight — will still be close to $2 trillion a year.
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