Tag Archives: government shutdown

News Roundup – Government Shutdown, Debt Panic

I have been running around like a chicken with its head cut off. I have been in Huntington, West Virginia, Asheville and I’m now chilling at DFW. I just attended the funeral of my Aunt Thelma. She was 92. She had a marvelous life and was truly blessed. The service was fabulous. Frank Tull, Thelma’s son and my cousin, presided. He did an absolutely wonderful job. It was a true celebration.

Government Shutdown. Woohoo, the government shutdown is over. Government workers are going back to work. Things are opening up again. So, what was this all about? What was accomplished? Nothing. Congress made an agreement to kick the can down the road. Everything comes to a head again in three months. We spent $24 billion for nothing.

The problem I see is that the equation hasn’t changed. We still have Democrats that aren’t going to cave in and slash Social Security, Medicare or Medicaid. That’s not going to happen. The far right still hate ObamaCare (Affordable Care Act).

More later.

Cost of Government Shutdown

I don’t know. I just thought some data would helpful.

From Peter G. Peterson Foundation:

Even as Congressional leaders and the president discuss a potential temporary solution to the current stalemate over the government shutdown and the debt ceiling, the repeated cycle of lurching from crisis to crisis has significant and real costs to the U.S. economy.

A new report, prepared by Macroeconomic Advisers, LLC for the Peter G. Peterson Foundation, examines the cost of crisis-driven fiscal policy over the past few years by looking at indicators including GDP growth, the unemployment rate and the corporate credit spread. The paper considers recent policy and political battles including the sequester, the government shutdown and brinksmanship on the debt ceiling.

Top-level findings include:

A new report, prepared by Macroeconomic Advisers, LLC for the Peter G. Peterson Foundation, examines the cost of crisis-driven fiscal policy over the past few years by looking at indicators including GDP growth, the unemployment rate and the corporate credit spread. The paper considers recent policy and political battles including the sequester, the government shutdown and brinksmanship on the debt ceiling.

Top-level findings include:

  • Fiscal Policy Uncertainty: Since late 2009, fiscal policy uncertainty has raised the Baa corporate bond spread by 38 basis points, lowered GDP growth by 0.3 percentage points per year, and raised the unemployment rate in 2013 by 0.6 percentage points, equivalent to 900,000 lost jobs.
  • Government Shutdown: A 2-week partial government shutdown would directly trim about 0.3 percentage points from 4th-quarter growth.
  • The Debt Ceiling: The paper considers two scenarios. The first assumes a brief, technical default that is quickly resolved, and the second assumes an extended, two-month stalemate.

1. In scenario one, risk aversion rises, financing costs rise, prices of risk assets fall, and the economy enters a recession. Exacerbated by the Fed’s inability to lower short-term interest rates, growth only begins to rebound at end of 2014 and the unemployment rate rises to a peak of 8.5% before starting to decline. At its peak, 2.5 million jobs would be lost.

2. Scenario two implies a longer and deeper recession than in the first scenario, but one characterized by extreme volatility. Annualized GDP growth fluctuates rapidly between plus and minus 8% until the oscillations diminish in 2015. Unemployment rises to a peak of 8.9% — equivalent to 3.1 million lost jobs — before trending down.

  • Discretionary Spending: Reductions in discretionary spending have reduced annual GDP growth by 0.7 percentage points since 2010 and raised the unemployment rate 0.8 percentage points, representing a cost of 1.2 million jobs.

 

– See more at: http://pgpf.org/special-reports/the-cost-of-crisis-driven-fiscal-policy#sthash.h6Nphd83.dpuf

Government Shutdown – Day 15

Tell me if you have heard this one before. The government shutdown is dragging on and there is no end in sight. Well, it looks as if we are making some progress. I mentioned that we would have be close to October 17th and it looks like I was right. The House is too dysfunctional to really get anything done. So, once again, the Senate has taken the ball. Here’s what we know –

The emerging agreement would extend the Treasury Department’s borrowing authority until February 7th, reopen the government and fund federal agencies through mid-January, according to aides and lawmakers familiar with the negotiations.

From what the Washington Post is reporting, the GOP is not getting anything, but I find this really hard to believe. Nothing? Stay tuned. The devil is in the details. On the other hand, I don’t understand why the Democrats would agree to a short-term measure. Doesn’t that mean that we are going to be right back here in a couple of months? This is key.

Melissa sent me this video yesterday. It appears that the GOP has changed the House rules, making it impossible without approval of the Speaker to introduce legislation to fix this government shutdown.

What are your thoughts? How can we change this?