Investing.com-- With just two days left before the U.S. government funding deadline, the likelihood of a government shutdown has increased but is not expected to last long, analysts at Goldman Sachs said in a note.
With the December 20 funding deadline approaching, uncertainty remains high after President-elect Donald Trump opposed a proposed spending bill and unexpectedly demanded a debt limit increase, analysts said.
Congressional leaders introduced a funding extension on December 17 to keep the government running until March 14, 2025. The proposal also includes more than $100 billion for disaster and agricultural aid. However, Republican support for the measure is weak, and Trump’s objections have complicated negotiations.
Despite this, analysts note Trump supports the bill’s key elements, raising hope for a compromise before the deadline.
If no agreement is reached, Republicans might push for a short-term "clean" funding extension to avoid a shutdown. But this would delay addressing issues like disaster aid until early 2025, something neither party favors, according to Goldman Sachs.
Debt ceiling concerns are also in the spotlight. While the debt limit suspension expires on January 2, 2025, the Treasury can likely continue borrowing until the third quarter of 2025. Analysts believe this reduces the urgency for immediate action, but Trump’s focus on the issue signals it could resurface early next year.
Goldman Sachs estimates that each week of a shutdown would reduce quarterly GDP growth by 0.15 percentage points, with an equivalent rebound once the government reopens. While a brief shutdown is possible, analysts view a prolonged impasse as unlikely.