US Budget: Clouds gathering on the horizon – Nomura

Analysts at Nomura explain that although the release of the Trump administration’s proposed FY 2018 budget will have little influence on the final spending package that will eventually pass Congress, it has provided some interesting insights, including details on an infrastructure plan and a desire to curtail federal government spending drastically on a variety of social programs. 

Key Quotes

“More importantly, the administration’s proposed budget highlights two important upcoming deadlines. First, a budget or continuing resolution must be passed by 30 September to keep the government operating beyond then. Second, a new debt ceiling limit or a debt ceiling suspension must be passed by the fall before “extraordinary measures” run their course. 

• The risk that a budget fails to pass is higher than in May, when the remainder of FY 2017 was passed, but historically low as there has never been a government shutdown when the same political party controls the House, Senate, and White House. 
• Likewise, the risk that Congress fails to raise or suspend the debt ceiling, before the Treasury Department is no longer able to pay all of its bills in full and on time, is low. Moreover, contrary to Secretary Mnuchin’s preference, it is unlikely that Congress will address the debt ceiling before the August recess.”