A shutdown would threaten a downgrade in the United States’ credit rating by Moody’s Investors Service, which cited political dysfunction as a growing social risk. A federal funding interruption would also have political repercussions for both parties.

Congress has only a few days to pass a new temporary bill before funding runs out after November 17th. Mike Johnson suggested on Sunday that his plan would give lawmakers time to negotiate individual spending bills, as conservatives demand.
Johnson’s plan could face resistance from both conservative Republicans and the White House, who are frustrated by the absence of Ukraine aid in the program and its extension of funding for some agencies until January 19th and others until February 2nd. Johnson’s plan would extend the current budget for the Departments of Veterans Affairs, Energy, Agriculture, Transportation, Housing, and Urban Development until January 19th, with the rest extended until February 2nd.

Given his slim majority and opposition from some Republicans, Johnson will need some Democratic votes. Democrats have remained silent for now. Additionally, there is the risk of a White House veto. However, the bill does not contain the conditions that many Democrats feared, and a veto threat could allow Republicans to shift blame for the shutdown onto the President.

This year, the United States came close to defaulting on its debt, prompting Fitch Ratings to downgrade the country’s sovereign debt and costing Johnson’s predecessor his position. Hardline Republican supporters ousted then-President Kevin McCarthy after he proposed a similar stopgap without strings attached.
Moody’s, the only major credit rating agency still assigning the highest rating to the United States, modified its rating outlook for the United States from stable to negative on Friday, citing risks to the country’s fiscal strength and political polarization in Congress.

If it starts next Saturday, a shutdown would leave hundreds of thousands of federal workers unemployed just before Thanksgiving and delay government contracts and supplier payments. Military personnel, law enforcement officers, and other essential employees would continue working but not be paid until the impasse is resolved.

So far, financial markets have ignored the growing risk of a shutdown as investors focus on high interest rates, bond market volatility, slowing consumer spending, and the Middle East conflict.
A government shutdown would initially have a mild economic impact but would escalate gradually as millions of workers go unpaid, private contractors are not paid, and uncertainty increases. The University of Michigan’s Consumer Confidence Index dropped to its lowest level in six months in its preliminary reading for November.