“I think we’re headed into a shutdown”
Washington is hours away from a government shutdown, and efforts to avoid it have failed so far.
The markets have been through shutdowns before, mostly with little long-term damage. But government observers say that this time could be different — and it’s coming at a delicate moment for the economy.
The latest: A meeting on Monday between President Trump and congressional leaders failed to end a stalemate over federal funding. (Given Republicans’ slim majority in the Senate, Democratic votes are needed to bypass a filibuster for a stopgap spending bill.)
Democrats want provisions to extend subsidies for Obamacare insurance plans set to expire at year end and to restore some Medicaid funding that was cut by Republicans’ big domestic policy and tax bill. Republicans said they were willing to negotiate on health care spending, but want to pass the continuing resolution first.
What’s at stake:
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The Trump administration has threatened to fire — not furlough — scores of government workers, which is seen as both political brinkmanship and a way to advance its efforts to drastically reduce the size of the federal government. (Furloughs normally don’t affect unemployment numbers, but layoffs would.)
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There’s also the question of whether Democrats are right that the country faces a health care “crisis,” potentially in the form of significantly higher premiums for about 20 million Americans who buy insurance via Affordable Care Act exchanges, Politico notes. Republicans like Vice President JD Vance counter that these are “policy disagreements.”
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A shutdown could also affect the release of government data, including the September jobs numbers that the Labor Department is set to release on Friday and monthly economic indicators from the U.S. Census Bureau.
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A prolonged shutdown could erode investor confidence at a time when some analysts worry that stock valuations have gotten too high. “The characteristics of this rally do worry me a little bit, and it feels a little late inning,” Nate Thooft of Manulife Investment Management told The Wall Street Journal. (Gold prices are soaring.)
What isn’t happening: Democrats risking a shutdown to fund free health care for unauthorized immigrants.
The prognosis for avoiding a shutdown: not good. “I think we’re headed into a shutdown because Democrats won’t do the right thing,” Vance told reporters.
Hakeem Jeffries, the House minority leader, said of Republican promises to discuss health care funding only after the passage of a continuing resolution, “To kick the can down the road and expect us to take a Hail Mary promise, that’s unreasonable.”
HERE’S WHAT’S HAPPENING
California enacts a new A.I. safety law. The state’s broad new rules require artificial intelligence companies to report the safety protocols used in developing their most advanced software and the greatest risks posed by their technology. The law is expected to escalate a conflict between states seeking to regulate A.I. and tech companies pushing back against a proliferation of such laws; those include Google, Meta and OpenAI, as well as venture capital firms like Andreessen Horowitz.
The Trump administration moves to make another attack on Harvard. The Health and Human Services Department said the university could face debarment, which would prevent the school from receiving future research grants, essentially prohibiting it from doing business with the government. It’s the latest effort by the administration to pressure Harvard as the two sides struggle to negotiate a settlement over the government’s campaign against the institution.
The founder of the fintech start-up Frank is sentenced to 85 months in prison for fraud. Prosecutors had sought an even higher sentence for Charlie Javice, who was convicted in March of providing fake customer lists to raise the value of the business when she sold it to JPMorgan Chase in 2021. (JPMorgan paid $175 million.) “I have remorse deeper than I knew possible,” Javice said during a hearing on Monday.
Boeing is said to be developing a successor to the 737 Max jet. The plane maker has taken steps including drawing up plans for a new narrow-body plane and discussing engines with Rolls-Royce, according to The Wall Street Journal. A replacement for the troubled 737 Max could help Boeing turn the page on one of its worst chapters, with the model involved in two deadly crashes that led to its grounding in 2019.
The soybean squeeze
Shutdown politics and Washington gridlock could torpedo President Trump’s effort to help farmers amid his escalating trade war.
The latest fallout involves soybeans. The harvest is underway, but China is not buying, and farmers are bracing for overflowing stockpiles, Grady McGregor reports. “Frustration is mounting,” said Caleb Ragland, the president of the American Soybean Association.
China has long viewed American farmers as a weak link in Trump’s trade fight. In 2018, China imposed a tit-for-tat tariff on soybeans. Trump eventually doled out $28 billion in aid to farmers affected by that trade war.
Then, Trump relied partly on Agriculture Department funds to pay them. His new idea: “We’re going to take some of that tariff money that we made, we’re going to give it to our farmers, who are, for a little while, going to be hurt until the tariffs kick into their benefit,” he told reporters last week.
It’s not that simple, Republicans concede. Senator John Thune, the majority leader, said on NBC’s “Meet the Press” on Sunday that farm aid would be needed, and that tariffs could help pay for it. But Representative Glenn Thompson, Republican of Pennsylvania and chair of the House Agriculture Committee, said this month that such a move would be difficult.
One obstacle? The move would probably require Congress to approve matching spending cuts, which is unlikely with the government potentially on the brink of a shutdown. “It’s something that doesn’t mechanically work as well as it sounds on the surface,” one Republican aide, who was not authorized to speak publicly on the matter, told DealBook.
Agriculture lobbyists are pushing for a trade deal with China that would guarantee American farmers access to the Chinese market.
But Trump has less leverage with China here, analysts say. Since Trump’s first term, China has spent years building agricultural ties with countries like Argentina and Brazil. (Given that, some Republican lawmakers and lobbyists have fumed that the Trump administration is weighing a $20 billion financial bailout for Argentina as they see the country cozying up to China and potentially takingmarket share from the U.S.)
“China’s leverage is definitely higher now than a decade ago,” Darin Friedrichs, director of agriculture market research at Sitonia Consulting, told DealBook.
The stakes are high for U.S. farmers. They could lose their biggest buyer — China bought $12.6 billion in American soybeans last year. “These markets don’t come back overnight,” Senator Amy Klobuchar, Democrat of Minnesota and a member of the Senate Committee on Agriculture, Nutrition and Forestry, told DealBook.
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In related news: The Trump administration said on Monday that 10 percent tariffs on timber and lumber, and 25 percent duties on kitchen cabinets, bathroom vanities and upholstered furniture would go into effect on Oct. 14 — and not as early as Wednesday, as Trump wrote on social media last week. (Some of those levies are set to rise on Jan. 1.) Separately, some small businesses are getting especially walloped by Trump’s tariffs.
“We find some of his arguments questionable, others incomplete and almost none persuasive.”
— Michael Feroli, the chief U.S. economist at JPMorgan Chase, on Wall Street’s response to the first major policy speech by Stephen Miran, the newest Fed governor. President Trump’s appointee has pushed for steep and speedy interest-rate cuts, while many of his colleagues at the central bank have urged caution in the face of rising inflation.
YouTube’s Trump hit
Tech executives have had a prime seat at some of President Trump’s biggest moments this year, including Inauguration Day and the state dinner this month at Windsor Castle. But that proximity hasn’t shielded them entirely from the president’s broadsides.
The latest: YouTube agreed on Monday to pay $24.5 million to settle a federal lawsuit that Trump brought in 2021 after the Google subsidiary suspended his account following the Jan. 6 riot that year in Washington. Consider:
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YouTube is the last of three tech giants to reach a deal this year.
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In January, Meta agreed to pay $25 million; Elon Musk’s X (formerly Twitter) agreed to pay around $10 million in February.
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Google was eager to have its payment be lower than what Meta had agreed to, The Wall Street Journal reports.
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YouTube will pay $22 million to Trump. The president has directed that the money be contributed to a nonprofit group, the Trust for the National Mall, and to the construction of a $200 million ballroom at the White House. The remaining $2.5 million will go to other plaintiffs in the case.
The cases were considered weak. Legal analysts had questioned the merits of the lawsuits, which had accused the social media platforms of censorship. Trump’s case against Twitter was dismissed in 2022, while judges stayed those against Meta and YouTube.
But the companies may be trying to avoid friction with Trump at a time when his administration is pushing the limits of presidential power to punish perceived enemies. They “do seem like they are currying favor with the presidential administration,” Carl Tobias, a professor at the University of Richmond School of Law, told The Times.
Big Tech is hardly alone. Trump has collected more than $90 million from his lawsuits, including $16 million from Paramount over the president’s dispute over the editing of an interview on the CBS News “60 Minutes” program with Kamala Harris. And Disney’s ABC temporarily pulled the late-night host Jimmy Kimmel off the air after his remarks about the killing of the conservative activist Charlie Kirk drew the ire of the president and prompted threats from Brendan Carr, the F.C.C. chair, and ABC affiliate owners.
Could Trump be zeroing in on executives next? Last week, the president said that Microsoft should fire its head of global affairs, Lisa Monaco, who served in the Biden and Obama administrations.
THE SPEED READ
Deals
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Electronic Arts’ leveraged buyout pushed global M.&.A. deals over $1 trillion in the third quarter, up sharply over last year. (FT)
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Once Upon a Farm, the baby food start-up co-founded by the actress Jennifer Garner, has filed for an I.P.O. even as its losses grow. (Bloomberg)
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The auto parts supplier First Brands filed for bankruptcy as lenders and its board reportedly investigate whether the company made misrepresentations on its financial reporting. (WSJ)
Technology and artificial intelligence
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“Elon Musk hit by exodus of senior staff over burnout and politics” (FT)
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OpenAI is said to be planning a new version of its Sora video generator that would require copyright holders to opt out if they don’t want their works featured. (WSJ)
Best of the rest
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“The Mets Spent a Fortune to Win It All. They Became a $340 Million Disaster.” (WSJ)
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How a university employee lost her job after a private Facebook comment about Charlie Kirk found its way to Elon Musk. (NYT)
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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Niko Gallogly is a Times reporter, covering business for the DealBook newsletter.
The post The Economic Stakes of a Government Shutdown appeared first on New York Times.
