August 23, 2017 / 7:47 PM / in 2 months

Breakingviews- Trump antics may be virus, cure for uneasy market

WASHINGTON (Reuters Breakingviews) - Donald Trump’s antics may be both a virus and a cure for uneasy financial markets. The U.S. president threatened a government shutdown over border-wall funds as the risk of an Uncle Sam debt default looms just weeks away. Yet he is angering the very lawmakers he needs on these issues. Ironically, his divisiveness could actually serve to unite the middle to resolve these economic hurdles. 

U.S. President Donald Trump speaks at a campaign rally in Phoenix, Arizona, U.S., August 22, 2017. REUTERS/Joshua Roberts - RTS1CWJ3

The S&P 500 Index and other markets fell slightly on Wednesday morning after Trump’s raucous rally in Phoenix on Tuesday night. Back in campaign mode, Trump said he was getting funds to build a wall along the Mexican border, even if it means “we have to close down our government.” The government could be shuttered if new funding isn’t approved by him and a Republican-controlled Congress beyond the 2017 fiscal year, which ends Sept. 30.

At the same time, Republicans have yet to come up with a plan to raise the $20 trillion debt ceiling or risk a default. Treasury Secretary Steven Mnuchin said the government would run out of funds to pay its bills on Sept. 29. Trump implied several times during his campaign that it wouldn’t be a big deal if the United States defaulted. In 2011, Standard & Poor’s downgraded the U.S. credit rating for the first time after a fight over the borrowing limit.

Senate Majority Leader Mitch McConnell said Monday there’s “zero chance” that Congress would fail to raise the debt ceiling by the deadline. But he and Trump haven’t spoken for weeks after angry phone calls in which the president berated the veteran lawmaker over Senate probes into potential Trump campaign ties to Russian election meddling, the New York Times reported. Trump has also targeted Republicans who have criticized him, uniting other GOP senators to defend them. 

Democrats have been unwilling to work with Republicans, but the GOP leadership could be incentivized to dole out more carrots to get a deal done. Neither McConnell nor his counterpart in the House, Paul Ryan, wants a shutdown or a debt default. Democrats also oppose spending cuts that conservative GOP members want to attach to a debt-ceiling bill. The discord sown by Trump could bring moderates on both sides of the aisle together to strike a deal capable of surviving a presidential veto.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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