Goldman Sachs' Phillips: Shutdown Could Continue After Debt Ceiling Is Raised

Monday, 07 Oct 2013 08:58 AM

By Michael Kling

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While some pundits are forecasting that a deal on setting a federal budget and raising the debt ceiling, which is expected to be breached Oct. 17, will be combined, the government shutdown might continue even after Congress raises the debt ceiling, according to Goldman Sachs economist Alec Phillips.

Phillips believes there's a 30 percent chance Congress will increase the debt limit but not pass a budget, reports Business Insider.

In a note to clients, Phillips says Congress might fail to agree on a spending plan before the country reaches the debt limit.

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"However, it appears fairly clear to us that neither Republican nor Democratic leaders are interested in allowing the Treasury to run out of cash," he writes in a note to clients. "In such a scenario, it is plausible that House Republicans could agree to bring up a 'clean' or nearly clean debt limit increase, which would pass with more Democratic than Republican votes."

Senate Democrats would probably like to combine the issues. But because President Obama has said he won't negotiate over the debt limit, Senate Democrats might have difficulty rejecting a clean debt limit extension, Phillips contends.

The most likely outcome is that the issues will be merged, he states in the note, according to Business Insider. "This would make sense from a practical perspective since negotiating and passing a continuing resolution could take at least a week if there are procedural objections in the Senate, leaving little time for a debt limit negotiation before the Oct. 17 deadline."

As the debt limit deadline approaches, the odds appear to be growing that Washington will deal both issues at once.

"It's frankly now merged into a much bigger fight about the debt ceiling and the overall shape of the budget," an anonymous Republican allied with House Speaker John Boehner, R-Ohio, tells USA Today.

Besides trying to block the healthcare law, Republicans might press for fiscal reforms, the GOP representative said.

"It doesn't mean Obamacare is not part of it, it clearly is, but I would say what precipitated the fight is probably smaller than the issue we're moving toward now."

Senate Majority Leader Harry Reid, D-Nev., also sees the budget and debt limit issues merging.

"Right now, the debt ceiling's facing us very quickly. So we're talking about the (stopgap bill) now, but it's hard to separate the two because they're right on top of us," he said, according to USA Today.

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Related Stories:

Wiedemer: Washington Will Avoid 'Catastrophe'

$40 Million an Hour? That's Just the Start of Shutdown Cost

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