Street Calls of the Week
Investing.com -- The U.S. government has entered a shutdown after lawmakers failed to bridge partisan divides, with the political fight centering on Medicaid provisions and expiring Affordable Care Act (ACA) subsidies.
Senate Democrats are holding firm, using the 60-vote threshold to push for repeal of certain Medicaid measures, limits on rescissions, and a one-year extension of ACA premium tax credits.
According to Jefferies analysts, Democrats view the subsidies as a winning issue, noting potential $400–$500 monthly premium hikes for households if credits lapse.
Republicans, meanwhile, are seeking to pass a continuing resolution (CR) through November 21 but need five more Democratic votes to reach the threshold. Only Sens. John Fetterman of Pennsylvania, Catherine Cortez Masto of Nevada, and Angus King of Maine have broken ranks so far.
With Sen. Rand Paul voting against the GOP measure, momentum in the upper chamber remains constrained while the House, currently in recess, shows no sign of revisiting its prior package.
The impact of the shutdown will not be uniform across government operations. Agencies funded solely by congressional appropriations face broad furloughs and work stoppages, while those with mandatory or fee-based funding, such as the Pentagon, IRS, FDIC, and Federal Reserve, can continue to function.
Essential staff, including TSA and air traffic controllers, are required to work without pay, though financial stress would escalate if payrolls are missed.
A prolonged standoff also raises the possibility of reductions in force. The Office of Management and Budget has considered such steps, though current plans focus on furloughs.
Jefferies analysts noted that “department heads may push back on mass firings,” given the need to retain critical staff.
Resolution paths remain limited. Lawmakers may break the impasse if more Senate Democrats join Republicans on the CR, or the shutdown could stretch through one or two missed pay cycles, with constituent pressure and open enrollment letters on ACA premiums forcing a compromise.
In that case, a one-year extension of the subsidies appears the most probable outcome. Eliminating the Senate filibuster has also been floated but is seen as highly unlikely.
Analysts said a drawn-out shutdown “increases operational risk for agencies and contractors dependent on appropriations,” with defense, healthcare, and government services stocks particularly exposed.
The debate over ACA subsidies is expected to drive near-term sentiment for managed care and hospital names, while political brinkmanship and delayed payrolls could weigh on consumer confidence.