The key catalyst to ending the U.S. government shutdown: The political consequences of a SNAP interruption are severe, and both parties may be forced to reach a compromise!

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On Wednesday, this round of the U.S. government shutdown entered its 36th day, tying the record for the longest shutdown set in 2018-2019. Bank of America believes that the massive political consequences caused by the interruption of payments for the widely relied-upon Supplemental Nutrition Assistance Program (SNAP) may become a key "forcing mechanism" that compels both U.S. political parties to reach a compromise to end the current stalemate.

According to Chase Wind Trading Desk, Bank of America stated in a report on the 4th that due to the government shutdown, the SNAP benefits scheduled for release in November (commonly known as food stamps) have not been paid on time. The U.S. government announced on Monday it would use emergency funds to pay about $4.65 billion, but that is only a portion of the average monthly expenditure of $8 billion. More critically, the government indicated that there would be "significant delays" in payments.

Analysts believe that although the event has a direct economic impact on the market, the impact may be limited. The payment delay is expected to drag down November consumer spending by about 0.5 percentage points, but is unlikely to "disrupt the business cycle," as the funds are expected to be reissued once the government reopens.

However, the political impact of this event is much greater than the economic shock. Since about 12% of the U.S. population relies on SNAP benefits, payment interruption or significant delays will directly affect a large group of voters. Bank of America believes that the resulting massive political cost may prompt both parties to accelerate negotiations to prevent the situation from worsening.

SNAP interruption: limited but notable economic shock

According to a previous article by Wallstreetcn, some Republican lawmakers have expressed optimism about reaching an agreement. According to media reports, some Republican lawmakers predict the deadlock may end this week. Markwayne Mullin, a Republican senator from Oklahoma, said he is "very confident" that an agreement will be reached this week, and specifically pointed out, "I think it’s possible we could complete it by tomorrow night (Wednesday)... but more likely on Thursday."

Based on Bank of America’s research, the delay in SNAP payments will pose a significant drag on short-term consumption. SNAP benefits account for 0.5% of total U.S. consumer spending, and most recipients are low-income households, whose marginal propensity to consume is high and who typically spend the funds quickly on essential living expenses.

Therefore, analysts estimate in the report that the payment delay could reduce November consumer spending by as much as 0.5 percentage points. Although they believe this impact is "quite substantial," it is unlikely to trigger a broader economic recession. The report emphasizes that the consumption weakness driven by the SNAP interruption is likely to be temporary. Based on their assessment, once the government reopens, these funds will be disbursed retroactively. This means that the weakness in November could likely be offset by stronger growth in the future.

The real trump card: huge political fallout impacting 12% of the population

Compared with the relatively manageable economic impact, Bank of America's report believes that the political consequences of the SNAP payment interruption are "much greater". This is because the affected demographic is huge and creates undeniable political pressure.

The report emphasizes that about 12% of the U.S. population relies on SNAP benefits to maintain basic living conditions. When tens of millions of voters are unable to receive food assistance on time, the resulting social and political pressure is something neither party can afford. Such a broad and direct impact on people’s livelihoods is far more powerful politically than abstract macroeconomic data.

Therefore, although the government has announced partial payments, such “a drop in the bucket” remedies and payment delays still add up to a huge “political cost”. Analysts believe that it is this cost that is most likely to prompt both parties to end the shutdown to prevent even more severe political consequences.

Other potential catalysts: health insurance & Thanksgiving travel

In addition to SNAP interruption, the report also points out two other potential factors that may force an end to the shutdown in the short term.

The first is the government subsidy for the Affordable Care Act (ACA), which is about to expire at the end of the year. According to KFF data, if these subsidies are not extended, the average health insurance premium could more than double by 2026. Since the 2026 enrollment window is already open, consumers are already beginning to feel pressure over the possible surge in premiums, which is also a highly politically sensitive topic.

The second potential trigger is air traffic chaos. News reports indicate that as air traffic controllers collectively call in sick due to unpaid work, there are increasing incidents of flight delays and ground stops. With the Thanksgiving travel peak approaching, the situation could escalate quickly and develop into a serious political issue. However, there is also a variable here: Congress may pass a special bill to pay only these "essential workers". If this happens, it could ease the travel crisis, but it would also remove one of the pressure points for a comprehensive compromise, potentially resulting in an "unusually drawn-out" government shutdown.

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