The Government Probably Isn't Shutting Down

Shutdown threats and called bluffs, Chinese AI developments, and a battle in higher ed.

When Everyone Wants a Shutdown, No One Does

For nearly every looming government shutdown threat that I can recall, the dynamic has been fairly straightforward. The minority party tries to gain concessions on the funding bill from the majority party with the threat of a shutdown, and both parties try to pin the culpability for the shutdown on the other.

This time around, things have been different. While the funding bill appears to be fairly par for the course, the atmosphere in DC right now is apocalyptic, with a polycrisis of foreign policy shifts, trade wars, and DOGE-induced panic in the federal bureaucracies.

While congressional republicans are motivated to pass a continuing resolution to fund the government, the Trump administration itself seems not particularly bothered by the concern of a shutdown. Most of the administration’s actions in the last two months have been to dramatically cut back on programs, contracts, and government employees, effectively shutting down large swathes of the administrative state.

As Schumer himself has pointed out in a rare New York Times op-ed from the senate minority leader, a shutdown could play right into the hands of the Trump administration’s plans with DOGE, granting a legal permission structure and near-emergency powers to expand their efforts in that vein. Because of this, congressional democrats have seemingly elected not to organize a filibuster, and have been given the freedom by leadership to choose their own messaging on the bill.

The vice president has been seemingly lobbying for the passage of the CR, but as blogger Matt Yglesias has noted, the bill includes a poison pill related to city funding designed specifically to piss off DC staffers and force a shutdown.

At any rate, Manifold forecasters gave as high as 90% odds to a shutdown, a couple days ago, as it appeared all but certain that democrats would force a shutdown and republicans would be happy to let that occur. But if everyone wants a shutdown, people start to become suspicious. Schumer’s announcement that he would call the republicans’ bluff and allow the CR to move forward without a filibuster sent the market on shutdown odds crashing down to where it now stands at ~10%.

These 10% odds probably still reflect two possibilities:

• The democrats could change tack after a response from their base and 41 senators could still choose not to vote for cloture.

• Trump could find some fault in the bill and elect not to sign it at the last moment.

And of course, there’s still time later this year for a shutdown, in September, when the continuing resolution expires.

AI: the Pacific Front

After OpenAI called for protectionist policies to restrict the use of Chinese LLMs in the US yesterday, Manifold bettors seem to think it’s plausible that policymakers take heed, giving 28% odds to an American ban on Chinese AI models this year! This strikes me as a slight overestimate (there are currently only 12 traders on the market), but this would be a massive development, if it were to take place, likely dramatically affecting the global market for AI.

Currently, most of the leading AI labs in China seem to be following an open source paradigm, and Manifold bettors think that at the end of 2025, there’s a decent chance the best-performing open LLM will be from China.

Manifold traders are highly skeptical about the hype around Manus, a Chinese agentic platform, and think it’s unlikely that it will survive scrutiny. It appears to be a well-designed wrapper around Claude, but nothing Earth-shattering.

In general, however, Manifold forecasts an unpredictable year for AI developments, with decent potential for yet another paradigm shift among the frontier LLMs (along the lines of the success of self-instruction and reasoning models over the last 18 months).

However, it seems that traders are skeptical that open-source AIs will supplant the frontier labs’ closed models over this year, giving just 13% odds of such an occurrence.

Columbia (University vs. The District of)

The government’s detainment of Columbia protest organizer Mahmoud Khalil has drawn criticism from free speech advocates, and extensive press coverage. Manifold bettors think it’s slightly more likely that he will not be deported, with the market fluctuating between 30 and 50% over the last few days.

However, Manifold users also forecast that this action is a sign of more to come, assigning high odds that there will be more attempted deportations of green card holders.

As for Columbia University, the Trump administration has outlined specific demands in order for their federal funding to be restored, the Department of Homeland Security has conducted searches in Columbia dorms, and Manifold is still making up its mind on how these situations will play out. Courts may side with Columbia against the government’s grants revocation, but also Columbia might decide to play ball with the government’s demands. Both of these markets likely need more traders to come to a good estimate, FWIW.

Columbia is plausibly a test case (as the Washington Post has put it) for widespread actions of this nature against elite private universities, and the success or failure of these measures may impact whether the Trump administration continues in these efforts to shape the decision-making on university campuses.

Between reductions in science funding, enforced compliance with shifting federal anti-DEI admissions and faculty-hiring policies, and the elimination of grants through a dismantling of the Department of Education, universities are facing the most uncertainty they’ve seen in decades.

University endowments, which aren’t exactly get-out-of-jail-free cards for universities due to restrictions on their use by private donors, the financial implications of withdrawing large amounts during an economic downturn, and a potential federal tax on endowments, are likely suffering from the market crash. Here’s to hoping that soon, we can all get back to “Extreme Greed” rather than “Extreme Fear”.

Happy Forecasting!

-Above the Fold