A Government Shutdown Would Actually Be Bullish


John Boehner Eric Cantor


The big stories dominating the media right now involve the US fiscal follies. Specifically, there's the risk of a government shutdown at the end of September, and the there's the risk of a debt ceiling breach sometime soon thereafter


The GOP much prefers to fight over the debt ceiling, since the party feels it has real leverage. That's because in a government shutdown, it's highly likely that the GOP would take the blame, and lose big time politically. With a debt ceiling fight, there's the sense that the President HAS to negotiate.

The reason the GOP is so angry at Ted Cruz is that he's waging his "Defund Obamacare" war around the possible government shutdown, risking an actual shutdown, and thus risking a bad moment for the party.

But while the market might not like to see this shutdown happen, a brief one would probably be fine, or even bullish. The reason is that a government shutdown would weaken the GOP and make a debt ceiling fight much less likely. The party is unlikely to suffer the consequences of a shutdown, and then do something immediately after to make itself look like horrible.

The key thing is: A debt ceiling fight would be bad for markets (potentially) and the US economy. A brief government shutdown would likely nip this in the bud.