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Goldman Sachs: Why You Should Want the Government to Shut Down

Could a shutdown help avoid a debt crisis?


Turns out some people actually want a government shutdown for reasons other than for political purposes.

BusinessInsider reports that Goldman Sachs‘ (GS) Alec Phillips wrote a new note to clients today in which he says that a government shutdown may actually help avoid a debt crisis.

Phillips writes (via BusinessInside):

We suspect that many market participants would interpret a shutdown as implying a greater risk of problems in raising the debt limit. This is not unreasonable, but we would see it differently. If a shutdown is avoided, it is likely to be because congressional Republicans have opted to wait and push for policy concessions on the debt limit instead. By contrast, if a shutdown occurs, we would be surprised if congressional Republicans would want to risk another difficult situation only a couple of weeks later. The upshot is that while a shutdown would be unnecessarily disruptive, it might actually ease passage of a debt limit increase.

In other words, breaking the debt ceiling would be very bad. If a government shutdown happens and that makes House Republicans then decide to forgo another risky gamble with the country’s debt payments, all the better for the country — at least financially.

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