Goldman with the note:
House Speaker Pelosi and Senate Majority Leader Schumer have announced that they plan to move forward with legislation that ties an extension of government spending authority (a “continuing resolution”) with a suspension of the debt limit. A vote in the House looks likely this week. Republican leaders have reiterated their opposition to pairing the two measures and look likely to vote against the combined bills in the Senate. If Republicans block the bill in the Senate, this would leave Democratic leaders with three options between now and Sep. 30:
1. Pass a short-term extension of spending authority without the debt limit attached. The deadline to extend spending authority is Sep. 30, while the deadline to suspend or increase the debt limit is likely sometime in the last week of October. If Senate Republicans block the combined measure, Democratic leaders may opt to pass a short-term extension of spending authority–for three weeks, for example–to better align the next spending deadline with the debt limit deadline.
2. Pass an extension of spending authority and separately increase the debt limit via the reconciliation process. Democrats could increase the debt limit without Republican support if they choose. Doing so would require reopening the recently approved budget resolution and inserting “reconciliation instructions” to raise the debt limit by a certain dollar amount, which would likely need to be in the trillions to take the next deadline past the midterm election. While Republicans would prefer this option, Democratic leaders are likely to try to avoid doing this if possible, as a specific dollar amount would get more (negative) public attention than a calendar-based suspension, it would put responsibility solely on Democrats to pass the increase, and it could risk reopening the instructions for the $3.5 trillion fiscal package that is already encountering resistance among centrist Democrats.
3. Democratic leaders could stick to their plan. If Democratic leaders believe that Republicans might change their position at the last minute, they might continue along the current path. While it is hard to predict what Republicans in the Senate would do at the deadline, this path would be more likely than not to result in a shutdown October 1.
A shutdown October 1 is not the base case, in our view, because there is a fair chance that Democrats will shift strategy before the deadline. However, the longer Congress remains on this course, the more likely a shutdown becomes.