Congress started off Friday by moving swiftly toward a partial shutdown of the federal government at midnight tonight as a short-term funding bill that passed in the House on Thursday night is contested between the two parties. While the House voted 230-197 in favor of the bill, Senate Democrats and a few Republican senators signaled that they could opposed the measure. 

With the Senate is set to vote on the bill today, one team of analysts on the Street sees a 35% chance that the government will not come to an agreement on a funding plan. A short-term shutdown would not have a major impact, but the market could react if there is no deal, according to a team of analysts at Goldman Sachs. (See also: A Survivor's Guide for a U.S. Government Shutdown.)

A Looming Deadline

"The more likely outcome appears to be a short-term extension of spending authority to avert the shutdown," wrote Goldman economists in a note on Thursday. The current proposal would keep the government open for another four weeks, setting the next deadline at Feb. 16. "This would actually increase the risk to financial markets, as it would put the next spending deadline closer to the debt limit deadline, which could come sometime between late February and late March." The note pointed out that the market typically shrugs off shutdowns as long as the debt limit is not involved, noting that three prior shutdowns in 1995, 1995-96 and 2013 had only a modest effect on financial markets. 

The Goldman analysts estimated that a shutdown could slightly reduce first-quarter gross domestic product (GDP) by 0.2% of growth for every week that goes by—yet any slump would be recovered quickly and reversed in the following quarter. However, if a shutdown lasts several weeks, "the weekly effect might rise slightly as federal contractors and procurement could also begin to be affected." 

Congress has consistently voted to retroactively pay federal workers for the time they were forced to miss, hedging against any hit to personal incomes. However, the economists warned that a prolonged shutdown could dampen consumer sentiment, referencing data that shows a decline by an average of 7 points in the month of the three previous major shutdowns. (See also: A 10% to 15% Correction Is Unavoidable.)

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