Government Shutdown Is Possible as Lawmakers Depart Washington

House lawmakers left Washington on Thursday for a 13-day break, but a potential government shutdown awaits upon their return. Despite this impending crisis, it’s not a top concern for either Washington or Wall Street.

Greg Valliere from AGF Investments expressed surprise at the lack of attention to this issue. If no deal is reached, a partial shutdown could occur on March 1, followed by a full shutdown a week later.

House Speaker Mike Johnson hasn’t outlined a clear plan to avert the shutdown, and no concrete progress has been made. During a press conference focused on other matters, Johnson avoided questions about the shutdown.

Lawmakers left for their break without visible progress on the funding issue. This procrastination mirrors past instances where shutdowns were avoided last minute.

The economic repercussions could be significant. Credit rating agencies consistently cite political dysfunction as a reason for concern about U.S. creditworthiness. American Action Forum’s Doug Holtz-Eakin emphasized the importance of avoiding further downgrades.

If a shutdown occurs, it could cost the economy billions, as seen in the 2019 standoff. Lawmakers are also grappling with other pressing issues, including aid for Ukraine, Israel, and the Indo-Pacific, and a stalled bipartisan tax deal.

Many anticipate another short-term funding extension, but a long-term solution would involve passing all 12 annual budget appropriations bills.

Senate Majority Leader Chuck Schumer remains optimistic about reaching a deal by March 1, but challenges remain, especially with the Senate currently in recess. House Speaker Johnson may face opposition from conservative Republicans, potentially complicating negotiations.

As lawmakers head home, the looming threat of a government shutdown hangs over their heads. While it may not be making headlines now, the consequences of inaction could be significant for both the economy and the political landscape.