“It looks unlikely that Congress will address the debt limit before the last minute, and there appears to be a material risk that Congress fails to act by the October 18 deadline,” Goldman Sachs economists wrote in a note.
The Wall Street bank added that a “lapse in borrowing authority looks like a real risk,” although that lapse would “probably be brief.”
“While not our base case, we also believe there is a real risk that Congress will miss the deadline,” Goldman Sachs economists wrote in the report.
“It is impossible to rule these or other steps out entirely, but we are skeptical that such moves will come into play this year,” the economists said in the report.
One big disadvantage here is that it would likely force Democrats to specify a new dollar amount for the debt limit, probably near $31 trillion, instead of just suspending it, Goldman Sachs said.
“Of course, these disadvantages are the reasons Republicans would like to require Democrats to use it. Nevertheless, this seems like the most likely option at the moment,” the economists said.
Goldman Sachs stressed that any lapse in borrowing authority would likely be brief because “the public and the financial market response would likely force a quick political resolution.”