Here we go again with a federal budget showdown threat

Another holiday season is upon us, and so is another threat of a federal government shutdown. But not in the week ahead.

Congress expects to vote on a stopgap-funding plan to keep the federal government open and paying its bills through Dec. 20. Failure to approve the short-term deal by Thursday would lead to a partial shutdown.

Investors have been seen this a lot in recent years, but this year’s budget fight isn’t a repeat of previous year’s battles. Yes, the Republicans and Democrats still are arguing over whether or not to spend billions of dollars on a border wall. And, yes, this argument led to a 35-day shutdown last December when President Donald Trump rejected a spending plan that didn’t fully fund his wall.

What’s different this year? Impeachment. That means more uncertainty. And investors need to be weary of more manufactured uncertainty.

The temporary spending plan considered in the week ahead will bring a budget showdown to Capitol Hill just as the House impeachment inquiry likely is headed for its own vote. In the best of times, Trump is unpredictable. Facing impeachment, who knows how the president may use or threaten to use a budget impasse for some other purpose? The president has been noncommittal to keeping the government open after this week. “It depends on what the negotiations are,” he said on Nov. 3.

For stock investors, the buildup to a government shutdown has been worse than the actual shutdown. In the weeks leading up to last December’s closure, the S&P 500 stock index fell 13 percent. By the time the government re-opened, the index had rebounded 10 percent.

There is no guarantee history will repeat, or even rhyme. But the uncertainty remains.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he’s vice president of news. Twitter: @HudsonsView.

This story was originally published November 15, 2019 at 6:00 AM with the headline "Here we go again with a federal budget showdown threat."