US shutdown and default

(Aug 29): The continued smooth recovery of the US economy shows that politics usually matters much less than most politicians believe. Despite high hopes at the start of the year, no progress on policy in 2017 has had little apparent impact on growth or markets. However, there are periods when action is necessary, and over the coming month US policy-makers need to prevent a government shutdown or even a technical debt default.

The issues of shutdown and default are separate, although negotiations could involve a grand deal to fix both at the same time.

The risk of shutdown comes from the need to pass a budget before the end of September, without which parts of the federal government will cease to function. This is not particularly unusual, and Congress will typically pass a temporary budget extension after a brief hiatus.

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