The House\u2019s historic vote to remove GOP Rep. Kevin McCarthy from the post of speaker is rattling Washington this week, with analysts seeing an impact on a range of funding fights.<\/p>\n
Until the 216-210 vote on Tuesday, no House speaker had ever been ousted by what\u2019s called a \u201cmotion to vacate.\u201d<\/p>\n
\n
What does the development mean for averting a partial government shutdown next month? Could there be significant cuts ahead for domestic spending? What about additional outlays on Ukraine? <\/p>\n
Below are some preliminary reactions from analysts.<\/p>\n
\u2018The risk of a shutdown has increased,\u2019 and spending cuts could come as well <\/h2>\n
\u201cHouse Speaker McCarthy\u2019s removal is markets
\n SPX
\n negative because it makes more intractable Washington\u2019s 2 intertwined political crises \u2014 the bipartisan inability to reliably fund the government and the bipartisan inability to address the out-of-control fiscal situation \u2014 and further embeds in world markets the view that the U.S. is unable to address out-of-control spending and ballooning debt and deficits,\u201d Terry Haines, founder of Pangaea Policy, said in a note.<\/p>\n
\u201cAt a minimum, the likelihood of government shutdown in mid-November just went up to 80%, as the House\u2019s inability to do its immediate job of funding the government increases.\u201d<\/p>\n
Congress last Saturday avoided a partial government shutdown with a\u00a045-day funding bridge, so lawmakers now face a new deadline of Nov. 17.<\/p>\n
Haines warned of the potential for a long period during which worries around federal funding persist, saying, \u201cIt\u2019s not a one-off shutdown markets should be concerned about, but increased volatility
\n VIX
\n for at least 3 months where markets won\u2019t know final decisions on U.S. government annual spending, particularly in government-dependent sectors including defense
\n ITA,<\/span>
\n semiconductors
\n SOXX
\n and healthcare
\n XLV.<\/span>
\n \u201d<\/p>\nRead more:<\/strong>\u00a0What McCarthy ouster means for markets as investors fret over congressional \u2018dysfunction\u2019<\/p>\nIt\u2019s ironic, according to Haines, that it\u2019s \u201conly the few House Republican purists who just deposed McCarthy who even discuss\u201d some of these financial issues, but he added that the \u201cpurists again demonstrated they have no plan, organization, will or ability to affect the rest of Washington on any of the issues.\u201d<\/p>\n
Other analysts also were seeing a greater chance for a shutdown after McCarthy\u2019s ouster, which was sparked by the former speaker\u2019s reliance on the support of House Democrats to pass the short-term funding measure last Saturday.<\/p>\n
\u201cNo legislative item will be more important \u2014 and more pressing \u2014 than how to address a potential shutdown once the current continuing resolution (CR), hastily passed this past weekend, expires on November 17th.\u00a0The risk of a shutdown has increased as the passage of this CR becomes more of a cautionary tale than an established precedent for the next speaker,\u201d Stephen Myrow, managing partner at Beacon Policy Advisors, said in a note.\u00a0<\/p>\n
Deutsche Bank strategists led by Jim Reid said: \u201cWith conservative Republicans having opposed McCarthy\u2019s deal last weekend, his ouster may raise the risk that we will get a government shutdown in November, or that the Senate is forced to accept spending cuts demanded by House Republicans to avoid a shutdown. So a fiscal risk to keep in mind for later in Q4.\u201d<\/p>\n
Related: <\/strong>U.S. government shutdown: Here\u2019s how it could affect you, from food aid to getting your passport<\/p>\nAnd see: <\/strong>What stock investors need to know about U.S. government shutdowns<\/p>\nPlus: <\/strong>How a government shutdown could complicate Fed\u2019s fight against inflation<\/p>\nOutlook for Ukraine aid is \u2018considerably more negative\u2019<\/h2>\n
U.S. spending on Ukraine as that country resists Russia\u2019s invasion \u201cfaces a more uncertain future,\u201d the Eurasia Group\u2019s Clayton Allen and Jon Lieber said in a note.<\/p>\n
\u201cEven though a clear majority in the House and Senate support Ukraine aid, the speaker ultimately decides what goes to the floor, and leveraging a government shutdown that no one wants is a powerful tool Ukraine opponents can use to keep the funding out of any short-term deal in November or later in the year,\u201d they wrote.<\/p>\n
\u201cThis leaves two paths to additional Ukraine aid: a speaker willing to buck a large and growing portion of the conference to pass a bill on the House floor, or Senate Democrats willing to shut down the government by blocking any government funding bill until it includes Ukraine aid.\u201d<\/p>\n
The Eurasia Group analysts said the Department of Defense, or DoD, still has some money that can go to Ukraine, but they suggested that the prospects have gotten worse for efforts such as President Joe Biden\u2019s request for an additional\u00a0$24 billion in security and humanitarian aid\u00a0for the country.<\/p>\n
\u201cThe $5 billion in additional aid and drawdown authority remaining in the DoD budget will cover some of Kyiv\u2019s demands in the coming months, but the outlook for major provisioning of U.S. aid is considerably more negative,\u201d they said.<\/p>\n
Potential for crypto legislation? Trouble for cannabis-banking bill?<\/h2>\n
It\u2019s hard to envision the House GOP\u2019s agenda \u201cshifting meaningfully\u201d with a new speaker, but there are \u201csome policy nuances that will depend on who is ultimately elevated,\u201d said BTIG analysts Isaac Boltansky and Isabel Bandoroff in a note.<\/p>\n
For example, one top Republican who is viewed as having a chance of becoming the next House speaker \u2014 Rep. Tom Emmer of Minnesota \u2014 \u201chas been a vocal proponent of digital assets
\n BTCUSD,
\n +0.22%<\/bg-quote>,<\/span>
\n \u201d they wrote.<\/p>\nEmmer, who has been the No. 3 House Republican, is co-chairman of the Congressional Blockchain Caucus.<\/p>\n
Related:<\/strong> Kevin McCarthy ousted as House speaker: Here\u2019s who could replace him<\/p>\nBad feelings among Republicans and Democrats after Tuesday\u2019s vote could make it tougher to reach deals on issues such as a much-anticipated cannabis-banking bill or expiring tax cuts, according to BTIG\u2019s team.<\/p>\n
\u201cFrom a practical perspective, partisan disdain could make crafting a year-end legislative package more difficult and lessen the likelihood of one-off policy riders (e.g., cannabis
\n MSOS
\n banking bill) or sweeping spending shifts (e.g., tax extenders),\u201d they said.<\/p>\n
Why would anyone want to be speaker at this point? Boltansky and Bandoroff also weighed in on that issue, which stems from the fact that currently a motion to vacate can be triggered by a single lawmaker.<\/p>\n
The BTIG analysts said they think that now in Washington there\u2019s \u201ca firm belief that the House rules package will need to be amended for anyone with staying power to take the gavel.\u201d<\/p>\n
Now read:<\/strong> Speaker pro tem McHenry takes swift action to evict Pelosi from honorary \u2018hideaway\u2019 office at Capitol<\/p>\nAnd see:<\/strong> \u2018The shot heard round the world\u2019: North Carolina Rep. Patrick McHenry\u2019s gavel slam after Kevin McCarthy\u2019s removal goes viral<\/p>\n<\/p><\/div>\nRead the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The House\u2019s historic vote to remove GOP Rep. Kevin McCarthy from the post of speaker is rattling Washington this week, with analysts seeing an impact on a range of funding fights. Until the 216-210 vote on Tuesday, no House speaker had ever been ousted by what\u2019s called a \u201cmotion to vacate.\u201d What does the development mean for averting a partial government shutdown next month? Could there be significant cuts ahead for domestic spending? What about additional outlays on Ukraine? Below are some preliminary reactions from analysts. \u2018The risk of a shutdown has increased,\u2019 and spending cuts could come as well<\/p>\n","protected":false},"author":1,"featured_media":1374,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":["post-1373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy"],"yoast_head":"\n
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