Shutting Down Government May Be Trump’s Best Negotiating Weapon

September is set to begin with the United States Congress facing two major issues:  raising the debt ceiling, which is the legislative limit on how much the government can borrow, and passing a spending bill. According to the U.S. Treasury, Congress needs to raise the debt ceiling by September 29. Failure to pass a spending bill could force a government shutdown.

The month also begins with President Donald Trump’s popularity falling to about 37 percent. This low approval rate is likely to have negative implications for the Trump administration’s agenda this year.

Given these circumstances, it may be in the President’s best interest to allow the government to shutdown in order to bring both Democrats and Republicans together to try to solidify support for some of his proposals including tax reform and increased infrastructure spending.

While many politicians believe that government shutdowns are a political disaster that spells certain doom for the careers of those politicians deemed responsible for them. In this case it may actually be used as an effective negotiating tool to help bring Republicans and Democrats, and Congress and the President together to hammer out the details of health care reform, for example.

I don’t think President Trump actually wants to see the government shutdown or default on its debt although he has promised to do so if he doesn’t get his border wall with Mexico. However, I do think it’s within his power to shut the government at least briefly to push Republican leaders to at least get some compromises with the Democrats hammered out before they move on to bigger issues.

History has shown that government shutdowns may actually produce positive results for the economy and for politicians worried about their careers. According to the Congressional Budget Office, a shutdown in 1995, for example, forced President Clinton to give in partly to the Republican demands and he was able to submit a more balanced budget.

Using a government shutdown as a negotiating tool is a risky proposition and leading up to the event, the financial markets are likely to experience volatility. However, in my opinion, it may be necessary because right now Congress isn’t moving forward at all. The inability to pass meaningful healthcare reform, a viable tax reform plan and approve increase fiscal spending may actually be doing more harm to the economy.

Just ask Fed Chair Janet Yellen if increased fiscal spending would be good for the economy. I’m sure she would agree that it would help promote growth and work with well with the Fed’s monetary policy projections.

I’m in favor of shutting down the government at least briefly at the end of September because I think it can be used as an effective negotiating tool to encourage Republicans and Democrats to reach comprises on key economic issues that should help improve the economy and prevent an economic downturn in 2018.