• Congress must fund the government by December 11 to avoid a shutdown starting December 12.
  • Prediction markets price a 38% chance of a shutdown, up 5 points, as negotiations are complicated by the approaching power transfer.
  • Democrats want to use spending talks to restrict funding for the war in Iran, but party leaders have not settled on a strategy.

Lame-Duck Session Begins

Congress returns today for a lame-duck session with just over a month to avert a government shutdown. The current stopgap funding measure expires on December 11, and without new legislation, federal agencies will begin to close on December 12. Lawmakers face a familiar choice: pass full-year appropriations bills or another short-term extension. With little time to negotiate the 12 annual spending bills, another continuing resolution appears the most likely path, though talks remain fluid.

The election has changed the political calculus without immediately shifting control of Congress. Democrats won both chambers in last week’s midterms, but Republicans retain their majorities until January. That means outgoing Republicans have one last chance to shape spending, while incoming Democrats must decide whether to engage now or wait for greater leverage next year. “We have a mandate to govern,” said a senior Democratic aide, who requested anonymity to discuss internal strategy. “But we also have a responsibility to keep the government open.”

A Familiar Sticking Point

Funding for the war in Iran is emerging as a potential flashpoint. Some Democrats want to use the must-pass spending bill to restrict the administration’s military policy, but party leaders have not yet united behind a specific demand. The White House has signaled it would oppose any effort to tie war funding to the budget, according to people familiar with the matter. The dispute adds another layer of complexity to already fraught negotiations.

Prediction markets now put the odds of a shutdown at 38%, up five points from a week ago. While such markets are not official forecasts, the shift suggests growing concern that a deal may prove elusive. The Kalshi contract showed a 43% probability at one point, while other platforms displayed slightly different figures, highlighting the uncertainty inherent in any snapshot.

Economic and Market Implications

The economic impact of a shutdown depends largely on its duration and scope. A brief interruption would likely have a limited aggregate effect, but a prolonged lapse would delay federal spending and reduce economic activity. Communities dependent on federal workers or government purchasing would face more concentrated disruption. Federal contractors could see delays in loans, permits, and agency services. Investors would also have to contend with delayed government statistics, making the economy harder to assess.

For historical scale, the 2018–19 partial shutdown reduced output by about $11 billion across two quarters, with roughly $3 billion never recovered, according to Congressional Budget Office estimates cited by Brookings. The 2025 shutdown, which lasted 43 days, interrupted pay, public services, and economic data releases. A new shutdown would carry similar risks, though its exact impact would depend on which agencies lose funding.

What to Watch

The clearest signals in the coming days will be whether appropriators agree on overall spending levels, whether Democratic leaders formally demand Iran-war restrictions, and whether leaders converge on an extension date. Another short-term extension into January or March remains the most plausible near-term path, but that would only shift the bargaining into the newly divided government. For now, the deadline is firm, and the outcome remains unresolved.

Correction: An earlier version of this article misstated the date of the 2025 shutdown’s end. It ended on November 12, not November 2.