The odds of a government shutdown rise as markets weigh another source of 'unwelcome' uncertainty
March 13, 2025
The federal government could be in for a shutdown in less than two days after Senate Democrats offered up a plan to play hardball and oppose a House bill that would keep the government open until September alongside spending cuts to various programs.
The counteroffer from Democrats — with the votes of at least a few of them required for any bill to pass — would keep the government open for a month but faces little chance of final passage in time with House Republicans already having departed Washington and Republican leaders confident they have Sen. Chuck Schumer and his colleagues cornered.
Senate Democrats tried to plot a strategy Wednesday — with reporters stationed
outside able to hear audible shouting
at one point — with Schumer then leaving the meeting to say, "Republicans do not have the votes in the Senate to invoke cloture on the House CR."
The standoff appears likely to lead to multiple votes in the coming days with economic and political prognosticators reacting with a mix of increased odds in the chances of a shutdown — alongside a jaundiced but unsettled view of what the effect might be on the economy either way.
"Historically, government shutdowns have had limited market reaction," analysts at Raymond James wrote in a note to clients this week. "That is likely to remain the case, but adding to the significant amount of uncertainty coming out of DC is unwelcome in the current market climate."
"Taking a shutdown off the table could slightly improve sentiment amid a tough week for markets," Tobin Marcus of Wolfe Research wrote in his own note.
Overall, plenty of observers have raised the odds of a shutdown in recent days with additional reminders that the uncertainty is unlikely to dissipate anytime soon.
The coming brinksmanship is set to cap a week of standoffs on Capitol Hill that began with
1-in-3 odds
of a shutdown as House Republicans announced a plan to muscle through their plan with slim margins and plenty of initial skepticism that they could succeed.
But
succeed they did
, with a 217 to 213 vote that advanced the stopgap measure.
In the end, House Speaker Mike Johnson only saw one member of his own party, Rep. Thomas Massie of Kentucky, oppose the bill and one Democrat, Rep. Jared Golden of Maine, move to support the GOP plan.
But the path to passage in the Senate, which requires the consent of 60 of the chamber's 100 senators, was always more complicated. Schumer weighed in Wednesday to say Democrats would be opposed.
"Our caucus is unified," he said, pushing instead the one-month plan "that will keep the government open and give Congress time to negotiate bipartisan legislation that can pass."
The situation is further heightened by budget cuts in the House GOP plan that could affect an array of programs — mostly notably a proposed $1 billion cut to the budget of Washington, D.C.
That move has led to unease in the nation's Capitol in recent days on fears it could lead to things like cuts in government services and forced teacher layoffs or furloughs.
A "recess at the Capitol" protest focused on this school issue is planned for Thursday morning with D.C. students likely to be in attendance at the Senate's Hart building.
There is also ample fear among Democrats that Trump and Elon Musk and Office of Management and Budget director Russell Vought, who would have outsized power in the event of a shutdown, could use the shutdown as a pretext for further or laying off even more federal workers.
As for next steps, Senate Democrats appear to be pushing for a standalone or amendment vote on their monthlong plan (without things like D.C. cuts) before any final passage vote, but Republicans are able and likely willing to block such an approach.
Assuming that initial vote fails, a vote on the seven-month funding bill is then likely to be considered with the question being whether enough Senate Democrats — approximately eight are expected to be needed to avert a shutdown — would be willing to vote for the package to keep the government open.
In any case, the drama is set to continue for Washington and economic observers up until almost the literal last minute after Senate GOP leader John Thune filed cloture on the House plan on Wednesday night — but Senate rules will likely mean a final vote isn't possible until Friday.
This post has been updated with additional developments.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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