Trump Predicts Government Could ‘Very Well’ Shut Down Oct. 1 (2)

President Donald Trump predicted that a US government shutdown is likely, citing a stalemate between his party and Democrats.

“We’ll continue to talk to the Democrats but I think you could very well end up with a closed country for a period of time,” Trump said Friday in the Oval Office.

The prospect of a shutdown increased after Senate Republicans and Democrats earlier Friday each blocked rival plans to provide temporary funding.

The Senate, which can take several days to pass legislation, afterward left town for a break lasting until Sept. 29. The House plans a longer recess extending until Oct. 7.

Financial markets tend to shrug off threats of a shutdown as just more heated Washington rhetoric given the history of standoffs being resolved at the last minute. Both sides are more dug in this time so a shutdown is both more likely and more difficult to end this time.

US equity markets, large-cap companies and major US government contractors are unlikely to be affected much in a short shutdown, even if it continues for a few weeks, according to a Bloomberg Intelligence analysis. But a longer funding lapse could start to impact economic growth, with a month-long shutdown lowering quarterly GDP growth by 0.4 percentage points as a rule of thumb, according to Bloomberg Economics.

Democrats are demanding a boost to health care spending while Republicans refuse to go along and instead back a simple bill to keep the lights on through Nov. 21.

Republican leaders hope Democrats will drop their demands and concede as the deadline nears rather than risk blame for a disruption in government services.

“The choice is pretty clear,” Senate Majority Leader John Thune said just before the chamber’s vote earlier Friday. “It’s going to be funding the government through a clean, short-term continuing resolution or it’s going to be a government shutdown. That’s the choice Democrats have.”

The Republican interim funding plan garnered only 44 votes, falling short of the 60 votes needed to overcome procedural obstacles in the Senate.

Democratic Leader Chuck Schumer put forward a rival plan to finance the government through Oct. 31 and that failed on a 47-to-45 vote. Thune called the proposal “unserious” in urging his members to unite in opposing it.

The $1.5 trillion Democratic measure would spend $350 billion to extend permanently expiring Obamacare tax subsidies for the middle class and would reverse a nearly $1 trillion cut to Medicaid spending enacted by Republicans as part of Trump’s tax legislation this summer.

Schumer argued that a battle over the subsidies was needed now given that insurers will send out premium increase notices Nov. 1. Thune has said he would “look at” the Obamacare issue later in the year.

“Americans will see the glaring contrast between the Republican plan continuing the status quo of Donald Trump’s health-care cuts and high costs and the Democratic plan to avoid a shutdown while lowering premiums, fixing Medicaid, and protecting funds for scientific and medical research,” Schumer said Thursday on the Senate floor.

Democrats, unable to slow Trump’s agenda or even garner much media attention for their efforts, are under increasing pressure to risk a shutdown. Schumer in March backed off from a similar threat and allowed 10 Democrats to vote for a temporary spending bill. He is taking a tougher line this time, even as some of the same 10 senators refuse to say how they will vote in the end.

The House approved the GOP stopgap spending bill, with only one House Democrat voting for it.

The Republican measure contains a handful of policy changes including a boost to security funds for lawmakers and federal officials and a provision allowing the District of Columbia to spend its own tax dollars in the next fiscal year.

Johnson was able to win over some conservatives — deeply concerned over their own safety after the assassination of the conservative activist Charlie Kirk — by promises to provide more money for their personal security later this year.

A stopgap bill is necessary to keep government agencies running after the end of the month because Congress has, as has become its habit, failed to pass any of the annual appropriations bills on time.

(Updates with potential market, economic impact beginning with fifth paragraph.)

To contact the reporters on this story:
Josh Wingrove in Washington at jwingrove4@bloomberg.net;
Erik Wasson in Washington at ewasson@bloomberg.net

To contact the editors responsible for this story:
Mario Parker at mparker22@bloomberg.net

Mike Dorning

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