Blog

Barring some sort of miracle from Congress, the government will technically shut down on Saturday at midnight after House Speaker Kevin McCarthy and the House Freedom Caucus failed to arrive at consensus for a 30-day stopgap known as a Continuing Resolution (CR) – despite a promise from McCarthy last week to remove roughly $300 million for Ukraine aid (on which he later reversed course).

"It became too difficult to do that, so we’re leaving it in," McCarthy said – signaling virtue over the bill he knew had no chance of passing at this point.

Bring it…

Rep. Matt Gaetz (R-FL), a key Republican holdout on the CR, says he's ready for a multiday US government shutdown if it means that demands such as conservative border policies are inserted into the eventual package.

If the departments of Labor and Education "have to shut down for a few days as we get their appropriations in line, that’s certainly not something that is optimal," Gaetz told Fox News's "Sunday Morning Futures," adding "But I think it’s better than continuing on the current path we are to America’s financial ruin."

"I want to fund the government. I'm not pro-shutdown," Gaetz continued. "But the way to fund the government is the same way we've been doing it since the mid-90s where it's one up or down vote on the entire government all at once."

That said, House Republicans are expected to move forward on four appropriations bills this week – though Congress is now set to miss its quickly approaching month-end budget deadline, while Republicans are also considering a different stopgap measure which would fund the US government for between 14 and 60 days.

Prior to Gaetz, Rep. Jim Jordan (R-OH) appeared on the show, where he said that in principle "everyone wants to get the 12 appropriation bills done," but "frankly, we’re not going to get it done in the next six days."

"So there’s going to have to be some stopgap measure," Jordan continued, adding that Republicans would have to "win something" in passing the CR.

On Sunday, Morgan Stanley broke down the impacts of a short-term (or longer) shutdown scenario…

Bottom line – a US government shutdown alone is unlikely to weaken growth but clearly could remind investors of other more powerful growth headwinds, supporting our broad preference for bonds over equities.