Goldman Sachs has sounded the alarm that the U.S. government might head towards a federal shutdown later this year due to intense disagreements among Republicans regarding substantial spending cuts.
Congress’s inability to reach a unanimous decision on annual spending bills might stagnate the U.S. political framework, cautioned the investment giant. This impasse could diminish the country’s economy by 0.2 percentage points weekly.
The backdrop to this is the staunch stance taken by the House Freedom Caucus members, advocating for a rollback of the spending to the fiscal year 2022’s mark of $1.47 trillion (£1.16 trillion). This figure is $120 billion shy of what President Joe Biden and House Speaker Kevin McCarthy settled on during their May debt ceiling talks, preventing a possible catastrophic default on U.S. financial obligations.
Despite the push from some Republicans for increased allocations towards defense, veterans’ welfare, and border management, experts indicate that achieving the stringent fiscal target would necessitate slashing budgets up to 25% in sectors including agriculture, infrastructure, scientific research, commerce, water, energy, and healthcare.
Representative Don Bacon, a moderate Republican from Nebraska, remarked, “Such profound cuts are being proposed. It feels like they’re aiming for a painful procedure for every sector.”
Echoing the concerns, Alec Phillips, Goldman’s top U.S. political economist, noted, “It’s becoming increasingly probable for the federal government to experience a temporary shutdown as the year progresses.”
