The removal of the US House of Representatives speaker boosts the chances of a US government shutdown in mid-November says Goldman Sachs:
- All other things equal, the leadership change raises the odds of a government shutdown in November, though with several weeks left until the deadline, many outcomes are possible.
- With many policy disputes remaining and a $120bn difference between the parties on the preferred spending level for FY2024, it is difficult to see how Congress can pass the 12 necessary full-year spending bills before funding expires Nov. 17.
- The next speaker is likely to be under even more pressure to avoid passing another temporary extension—or additional funding for Ukraine—than former Speaker McCarthy had been.
And thus:
- We continue to view a shutdown in Q4 as the base case, likely when funding expires Nov. 17.
- That said, while a leadership vacuum raises the odds of a government shutdown, we still view a prolonged shutdown (i.e., more than 2-3 weeks) as unlikely given the political consequences of certain aspects of a shutdown, particularly a failure to pay servicemembers, which occurs twice a month (the next pay date at risk is Dec. 1).