The Coming Government Shutdown

Health care dead. Tax cuts in doubt.

Is a government shutdown next? And when?

Details coming up, as the news folks say.

But first to the narrow canyons and broad shoulders of Wall Street…

We wondered yesterday if the post-health care market swoon would trigger another round of “buying the dip.”

It seems we have our answer…

The Dow was up a dip-buying 150 points today.

The S&P tacked on another 17 points. The Nasdaq added 35.

Must be all those tax cuts and infrastructure dollars coming down the pike now that health care passed…

Now, if you enjoyed last Friday’s health care fireworks… they may have just been the opening salvo…

A government shutdown could be one month away.

The federal government’s current funding expires at the close of April.

And as TheWall Street Journal reminds us today, Congress only has 12 legislative workdays to stow their axes and hammer out a new spending bill.

No bill by April 28… and the government shuts down. Partially shuts down, really…

The Marines won’t drop their rifles. The TSA will still be body-searching Grandma. The Social Security Administration will mail its checks.

But if you planned on visiting the Washington Monument this spring… well…

And if Washington is choked with gridlock now, how about a government shutdown into the bargain?

Trump has sent Congress an emergency request for $30 billion in extra funding for defense and $3 billion for border security — including $1.5 billion for “the wall.”

He also wants $18 billion in cuts from unspecified domestic programs.

But Democrats say no butter… then no guns… and no deal.

Sen. Patrick Leahy (D-VT) boo-hoos for example that Trump’s plan would “redirect even more money to the Pentagon by further slashing nondefense spending in fiscal year 2017.”

“This is not acceptable,” he adds, to our utter amazement.

And will Democrats vote to spend one thin buck on the wall?

Rep. Nita Lowey (D-NY) is senior Democrat on the House Appropriations Committee. She calls the wall “a nonstarter.”

And any spending bill needs at least eight Democratic votes in the Senate.

Will any break ranks?

The Democrats are out to spike Trump’s guns just on principle.

So maybe they’ll just sit back… let the government shut down… and let it all blow up in his mug.

The government last shut down in 2013. Republicans could at least point a finger at Obama and a divided Congress.

Can they afford to let it happen again… with Republican majorities in Congress… and a Republican on the throne?

Rep. Tom Rooney (R-FL):

Shutting down the government when you are a Republican Congress and a Democrat is in the White House was one thing. You could chalk that up to a disagreement between the parties. But when you control the House and the Senate and the White House and shut down the government — there is no excuse for that at all.

Rep. Tom Cole (R-OK) whinnies that a shutdown would be “just about as politically stupid as it gets.”

Be it so.

But since when did that matter, Mr. Cole, sir?

And if Bloomberg’s right, Trump might be prepared to shut down the government… though the heavens fall:

Given the sharp cuts he has proposed for nondefense spending, he may not have the same reservations as his predecessors about shutting down the government.

Does Trump risk it?

What about the markets? Are they ready for a government shutdown?

“A top Republican with close ties to the White House” apparently told Axios co-founder and former Politico reporter Mike Allen:

After the GOP failure on health care, a government shutdown… is “more likely than not… Wall Street is not expecting a shutdown and the markets are unprepared.”

Again, this from someone with “close ties to the White House.”

Now that the dip-buyers have gotten up to their usual tricks, David Stockman says it would probably take a “two-by-four between the eyes” to stop them.

Could April 28 be that 2×4?


Brian Maher
Managing editor, The Daily Reckoning

The Daily Reckoning