Goldman Sachs says Harvey makes government shutdown less likely

Goldman Sachs says shutdown probably won't happen

Economists at Goldman Sachs lowered their estimate of the probability of a government shutdown to 35% from 50%. They say that Harvey and relief efforts will improve cooperation and open a window for an easier debt ceiling hike.

"Recent events have lowered the odds of a government shutdown or a delayed debt ceiling hike but have also increased the number of possible scenarios, complicating the legislative outlook over the next couple of months," economist Alec Phillips wrote in a note to clients Tuesday.

"The main issue is Hurricane Harvey. Allowing a partial government shutdown when federal relief efforts are underway would pose greater political risks than under normal circumstances, raising the probability that lawmakers will find a way to resolve disagreements," he added.

"Congressional leaders are apt to combine this with legislation to extend federal spending authority and/or raise the debt limit if possible. If they do, a combined package would be more likely to pass and less likely to be vetoed, in our view," he wrote.

A new risk, Phillips added, is that the debt ceiling is just pushed a short time ahead and it becomes a problem later this year.