As Mike Johnson becomes House speaker, analyst puts risk of government shutdown at 20% to 30%

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Could newly elected U.S. House Speaker Mike Johnson deliver a partial government shutdown next month?

Don’t bet on it, according to some analysts.

The lengthiness of the House Republicans’ struggle to install a new speaker has helped bring down the chances for a shutdown when federal funding runs out Nov. 17, according to Terry Haines, founder of Pangaea Policy.

“The reason for that is the House generally, House Republicans specifically, can’t walk and chew gum at the same time, so what you have is a situation where they haven’t been doing work on the appropriations bills that they need to work on,” Haines told MarketWatch during a Barron’s Live interview on Wednesday.

“What they’re going to have to do is extend existing funding past Nov. 17 for a period of months to allow them to finish the job. So that shutdown risk is still probably in the 20% to 30% range, but it’s much less than it was just a couple of weeks ago.”

The GOP-run House has been consumed with working on settling on a new speaker since Oct. 3, when the chamber voted for the historic ouster of former Speaker Kevin McCarthy, a California Republican. Following McCarthy’s ouster, Haines had put the likelihood of a shutdown in mid-November at 80%.

Other analysts also were sounding optimistic Wednesday on the closure question.

Johnson supports a short-term budget bill, known as a continuing resolution or CR, that funds the government at current levels to either Jan. 15 or April 15, said Chris Krueger of TD Cowen’s Washington Research Group in a note just before Johnson’s election.

“Provided a speaker is elected this week, a shutdown on Nov. 17 seems unlikely; even the House GOP chaos agents who have pushed for a shutdown are exhausted,” Krueger said. “The main fight around Nov. 17 will be the $106B military aid supplemental focused on Ukraine, Israel & U.S.-Mexico border.”

The federal government is funded until Nov. 17 because McCarthy, the former speaker, worked with House Democrats to pass a 45-day funding bridge on Sept. 30 that averted a partial shutdown. But his maneuvers angered some hardline House Republicans, who then led the drive to oust him.

In Wednesday’s interview, Haines also said that “what markets need to know about Mr. Johnson is that they don’t need to know very much about Mr. Johnson.” He said he didn’t mean to be unkind to the Louisiana lawmaker, but there can be “a situation where speakers exist to be elected by coalitions within their own party, and the party structure ends up being more important than who the speaker is, and I think that’s where we are now.”

In addition, the Pangaea Policy founder said markets
SPX
are starting to become concerned for the first time in 40 or 50 years about the nation’s fiscal deficit, debt and spending.

“Political Washington doesn’t get that at all. What markets are looking for is something fairly substantial that shows that Washington is paying attention to those things and not trying to let them run amok,” he said.

Now read: Biden says he’s not worried House Speaker Johnson will try to throw out election results

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