GOLDMAN SACHS: Hurricane Harvey makes a government shutdown less likely

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Goldman Sachs says it’s now less likely that the US government will shut down in early October. Pablo Martinez Monsivais/AP Images

Hurricane Harvey has made it less likely that the US government will experience a shutdown in early October, Goldman Says says.

The firm lowered its expected 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,” according to Phillips. He sees that increasing their chances of resolving the ongoing impasse ahead of a shutdown.

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

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Congress is likely to appropriate further emergency funds. Goldman Sachs

This is not to say the looming threat of a shutdown has been completely eliminated. Phillips notes that President Donald Trump has mentioned one might be in the cards if his border wall initiative isn’t funded.

He also says that an extension of spending authority will probably be temporary, which would simply push the threat of a shutdown further into the future, rather than eliminate it entirely.