Finance GOLDMAN SACHS: Hurricane Harvey makes a government shutdown less likely

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The probability of an early-October government shutdown has declined to 35%, down from a 50% chance over the past couple of weeks, Goldman Sachs says.

Goldman Sachs says it's now less likely that the US government will shut down in early October. play

Goldman Sachs says it's now less likely that the US government will shut down in early October.

(Pablo Martinez Monsivais/AP Images)
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Hurricane Harvey has made it less likely that the US government will experience a shutdown in early October, Goldman Sachs says.

The firm lowered its probability to 35%, down from the 50% forecast it had maintained over the past couple of weeks, citing the ongoing natural disaster.

"Allowing a partial government shutdown when federal relief efforts are underway would pose greater political risks than under normal circumstances, raising the probability that lawmakers will find a way to resolve disagreements," Alec Phillips, the firm's political economist in Washington, wrote in a client note.

Congressional leaders are likely to combine efforts to allocate more funds for disaster relief with "legislation to extend federal spending authority and/or raise the debt limit," Phillips said. He sees that increasing their chances of resolving the impasse ahead of a shutdown.

Congress has historically appropriated more relief funds following major US hurricanes, said Goldman, which also provided this handy visual guide:

Congress is likely to appropriate further emergency funds. play

Congress is likely to appropriate further emergency funds.

(Goldman Sachs)

This is not to say the looming threat of a shutdown has been eliminated. Phillips noted that President Donald Trump had said one may be in the cards if his border-wall initiative isn't funded.

He also said an extension of spending authority would probably be temporary, which would simply postpone the threat of a shutdown rather than eliminate it.