Goldman on Possible Government Shutdown

A brief excerpt from a research note by Goldman Sachs economist Alec Phillips:

[T]he political environment at the moment seems ripe for fiscal conflict. We are still closer to the last election than the next one, and it is not a coincidence that recent major fiscal disruptions occurred in 2011 and 2013—odd years—when upcoming elections were still more than a year off. In the 2013 experience, public sentiment toward Republicans dropped sharply during and after the shutdown (Gallup’s Republican favorability measure hit a 20-year low), but a year later Republicans won the majorities in the House and Senate. Some lawmakers may conclude from this that voters’ memories are short and the political price for a shutdown more than a year before the next election is low.

As we've discussed, these stunts happen in odd years, and then the voters forget by the next election.

[W]hile the probability of a shutdown of some kind seems to us to be approaching 50%, we think the probability of a shutdown that has a significant effect on the financial markets or real economy is much lower, for two reasons. First, unlike the 2013 shutdown, which coincided with the deadline to raise the debt limit, the next deadline to raise the debt limit is unlikely to be reached until at least mid-November. ... shutdowns that overlapped with debt limit deadlines—the 1990 and 2013 shutdowns—have tended to result in a stronger reaction in financial markets than other shutdowns where the debt limit deadline was not about to be reached.
emphasis added

This possible shutdown isn't related to the "debt ceiling" (incorrectly named - actually about paying the bills), so hopefully this will be resolved. If not, some data releases will probably be delayed (September employment report, etc).

from Calculated Risk http://ift.tt/1JY3kQL
via YQ Matrix