We all know, somewhere inside our heads and hearts, that getting Congress to pass a debt ceiling increase by the September 29 deadline set by the Treasury Secretary, and also to pass a budget or at least a continuing resolution to fund operations of the government past September 30 is going to be one long, hard lift.
But there’s nothing like a threat from the President of the United States to veto legislation to fund the government if Congress doesn’t fund the construction of The Wall between Mexico and the United States to focus attention on exactly how hard getting the debt ceiling raised so that the U.S. government doesn’t default on its debts, and passing a budget to keep the government’s doors open is going to be. Today, after President Donald Trump threatened to shut down the government if Congress doesn’t vote money to build The Wall in a campaign-style rally in Phoenix, the Standard & Poor’s 500 stock index had edged 0.28% lower as of 11 a.m. New York time. Gold, the safe haven of the nervous, was up 0.22%.
In his speech President Trump’ said, ““Build that wall. Now the obstructionist Democrats would like us not to do it. But believe me, if we have to close down our government, we’re building that wall.”
Government operations are only funded through Sept. 30, which is the end of the federal fiscal year. If Congress and the White House don’t agree on new funding by then, we’ll have another government shut down. In July the House of Representatives passed a bill that included $1.6 billion for building The Wall. Senate Majority Leader Mitch McConnell has not said whether he will include a similar measure in the Senate funding bill. McDonnell needs the votes of at least eight Democrats to pass a funding bill. It doesn’t make getting a funding bill passed easier that the President has repeatedly attacked McConnell in recent days and that the Senate leader and the President are currently not speaking, according to well-sourced reports in the New York Times.
The last government shutdown was from October 1 until October 17 in 2013. And obviously a government shutdown won’t be the end of the world. (There are other pieces of legislation on similar deadlines that look to be caught up in this mess. For example, Congress needs to reauthorize a law that provides health care to low-income children by the end of September.)
The big danger here is that the politics of Washington will turn (or have already become) so toxic that Congress doesn’t pass either a funding bill or a debt ceiling increase by October 1. That combination would be enough to rattle the financial markets in the short term. In the long term this whole spectacle continues to eat away at faith in the U.S. dollar and in U.S. Treasury debt as a safe haven in the financial system.