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What Speaker John Boehner’s resignation means for the economy

John Boehner’s resignation as House Speaker has obvious political ramifications, and the economy will feel its effects too.

The resignation appears to be tied to the desire to pass a clean, short-term funding bill that would keep the government running through Dec. 11. Members of the Republican Party’s “Freedom Caucus” had been demanding that funding the government be tied to other measures such as defunding Planned Parenthood. Analysts now expect the House to avoid a shutdown, with some Republicans joining Democrats to pass a funding bill.

As Chris Kreuger, analyst with Guggenheim Partners, wrote in a note to clients Friday morning:

Boehner had been under considerable pressure from Tea Party-aligned members and it would appear that he did not have the votes to survive through the year and next (the argument being that Boehner was not confrontational enough). By resigning at the end of next month, we believe that Boehner ensures a shutdown will not happen next Thursday: he can rely on his core GOP supporters and the 188 House Democrats to keep the government from shutting down when the Senate sends a “clean” CR that funds the government until December 11 on Monday, September 28.

And that’s great news for the economy. In 2013, members of the Republican Party refused to fund the government unless President Obama and the Democrats agreed to a repeal of Obamacare. The standoff lasted 15 days and led to the furlough of 800,000 federal workers. The Congressional Research Service, surveying private analysts, said the shutdown shaved as much as 0.6% from fourth-quarter GDP growth that year.

There still will be opportunity, however, for legislative gridlock to lead to a government shutdown. According to Kreuger, Boehner’s resignation gives hardliners in the Republican party more power during a budget reconciliation process or during the debate to raise the debt ceiling, which must be done, he estimates, between Nov. 15 and Dec. 15 to keep the government running smoothly.

This post originally and incorrectly suggested that members of the House Freedom Caucus would back down from their demands to require defunding of Planned Parenthood as part of a short-term funding bill, based on a report now corrected story in the Washington Post