Trump government shutdown threat draws criticism, unnerves markets
President Donald Trump`s threat to shut down the U.S. government to secure funding for a wall along the Mexican border rattled markets on Wednesday and cast a shadow over efforts in Congress to raise the country`s debt ceiling and pass spending bills.
Congress will have about 12 working days when it returns on Sept. 5 from its summer break to approve spending measures to keep the government from shutting down, and a deadline also is closing in for raising the cap on the amount the federal government may borrow.
With those deadlines looming in late September and early October, Trump raised the prospect in a speech on Tuesday evening of a shutdown if Congress does not agree to fund the wall. U.S. stocks and the dollar weakened and investors pivoted to the safety of U.S. Treasury securities on Wednesday.
The S&P 500 Index was about 0.35 percent lower in afternoon trading. The Dow Jones Industrial Average was down by 0.33 percent and the Nasdaq Composite Index slid 0.38 percent. The dollar weakened against both the euro and yen.
In bonds, the benchmark 10-year Treasury note yield slipped to 2.18 percent from about 2.22 percent late on Tuesday.
Credit ratings agency Fitch said on Wednesday that if the debt limit is not raised in a timely manner, it would review the U.S. sovereign debt rating, "with potentially negative implications." The rating is its measure of confidence in the soundness of the U.S. economy.
Trump made building a border wall to deter illegal immigration a central part of his 2016 election campaign but the issue of funding it has not gained traction as lawmakers, including many of the president`s fellow Republicans, question whether it is necessary.
"If we have to close down our government, we`re building that wall," Trump said at a rally in Phoenix. "We`re going to have our wall. The American people voted for immigration control. We`re going to get that wall."
Republicans, who control the Senate and House of Representatives, have been trying for months to make a deal on funding the government.
Congress regularly faces this problem and usually ends up passing a temporary bill extending funding levels unchanged for a few weeks or months. Sometimes that sort of agreement cannot be reached, often because of an uncompromising stand taken on a narrow issue, and the federal government shuts down for a few days.
“Trump saying he would be willing to shut down the government over the wall obviously doesn’t really inspire much confidence in anyone," said Michael O`Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"Even if it is just a negotiating tactic, the overwhelming majority of the country and definitely most people in financial markets don’t think that is an issue worth shutting the government down over." `IMMORAL` WALL
Democrats also slammed Trump for his threat.
"Make no mistake: the president said he will purposefully hurt American communities to force American taxpayers to fund an immoral, ineffective and expensive border wall," Nancy Pelosi, the Democrats` leader in the House, said in a statement.
The White House stressed on Wednesday that Trump planned to work with Congress to get funding for the wall. "The president ran on it, won on it, and plans to build it," said White House spokeswoman Natalie Strom.
Related to the budget is the debt limit. Congress periodically raises it to allow more borrowing by the U.S. government but politicians sometimes take advantage of the need for this to insist on changes in federal spending or other priorities.
The Treasury Department has said the debt limit will need to be raised by Sept. 29. Some analysts expect that Congress will attempt to approve both a budget measure and a debt ceiling increase at the end of September to address these problems.
The Treasury already is using "extraordinary measures" to remain current on all of the federal government`s obligations. Those measures are expected to run out by mid-October.
The Trump administration has asked Congress to extend the debt limit with a "clean" bill that excludes any other provisions, something that Republicans who seek conditions to rein in spending may well balk at.
William Galston, a Brookings Institution senior fellow and former policy adviser to Democratic President Bill Clinton, said Trump’s push for wall funding could have trouble getting enough Republican votes to pass the House on a one-party basis, let alone the Democratic votes it would need to pass the Senate.
"He’d be forcing a confrontation with Congress and then he would be in the position of blaming Congress," Galston said.LIST OF WALL FUNDING SUPPORTERS
The White House issued a statement on Wednesday quoting 10 House Republicans, many of them members of the conservative Freedom Caucus, backing Trump`s call for border wall funding.
The House passed a spending bill late last month that included funding for the wall. In the Senate, where Republicans have a slim majority, Democrats are needed to pass most legislation and they have opposed including border wall funding in any fiscal 2018 spending bill.
U.S. stocks, cheered by Trump`s election in November and his promises of a business-friendly agenda that includes tax cuts, have stumbled in recent weeks as a result of turmoil in Washington, with the Trump administration repeatedly distracted by controversies and tensions with North Korea.
Past episodes when the debt ceiling has become a political football have triggered rough spells for the market. A standoff in August 2011 famously cost the United States its top-notch bond rating from credit rating agency Standard & Poor`s.
Then, the political jostling between congressional Republicans and the administration of Democratic President Barack Obama as the debt ceiling deadline approached resulted in the most jarring two weeks financial markets have endured since the 2007-2009 global financial crisis.
The most recent U.S. government shutdown was from Oct. 1-16, 2013, when hundreds of thousands of non-essential federal workers were furloughed in a dispute over funding for Obama`s healthcare law.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.