How Washington Will Deal With A Government Shutdown

2017-10-29T16:23:25+00:00 April 21st, 2017|Categories: Economy|

Where have the discussions gone about all the important issues? What happened to the March 15th budget deadline? And the fact that a fierce and vicious budget debate looms in our immediate future? But no one will discuss it now – let alone commit to a plan for solving it – ahead of time.

A friend emailed me an article from ZeroHedge entitled: 2017 Debt Crisis Looms. Congress Will Have 4 Days To Avoid Government Shutdown.

Essentially, Congress will have 4 days after it returns to Washington from Easter Break on April 25th to pass a budget, or the government will “shutdown”. That means April 29th becomes the potential “day of reckoning” for all things budget-related.

Unlike the approval of Supreme Court Justice Neil Gorsuch, there is no “nuclear option” to pass a budget with less than 60 votes. And there are plenty of issues baked into the cake that will likely prevent any kind of unity to achieve the necessary consensus.

In a statement by Democrat Minority Leader Chuck Schumer, he commented:

“If Republicans insist on inserting poison pill riders such as defunding Planned Parenthood, building a border wall, or starting a deportation force, they will be shutting down the government and delivering a severe blow to our economy” source=”Democrat Minority Leader Chuck Schumer” A stalemate is built into this negotiating equation from the get-go, and still almost no one is discussing it. This stalemate can have severe ramifications and result in a new chapter of melodrama from the Washington elite.

All this is knowingly happening against a backdrop of rapidly-changing economic data:

  • Only 98,000 new jobs were added in March.

  • The Atlanta Fed’s GDPNow forecasting model is now projecting that U.S. GDP growth for the first quarter of 2017 will be just 0.6 percent on an annualized basis.

  • There has been no growth for commercial and industrial lending the past 6 months.

  • Commercial bankruptcy filings, from corporations to sole proprietorships, were up 28% in March from February, which is the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012.

  • U.S. credit card debt just exceed $1 Trillion.

  • Retail stores are closing.

  • Pensions are facing significant shortfalls.

These individual circumstances set the stage for significant uncertainty.

When stacked up against looming threats (and promises) for actions (and reactions) involving various military situations around the globe (that now include the U.S., Russia and China – and many other smaller players) uncertainty rises to epic proportions.

No one wants to be blamed for economic failure. All sides, the Democrats, the Republicans, the House Freedom Caucus and the President, have all positioned themselves to defend their promises and their constituencies.

Now, the external threat of confrontation looms – involving players who are outside of our control.This is the perfect storm for just one thing. One thing that helps all sides save some kind of political face with their voter base. They will eventually agree to “print the difference” and increase the debt – because circumstances (real, contrived, political and otherwise) will give them all the political cover they are starving for at the moment.

That political cover will come at the cost of a continual downward trajectory in the living standard for the rest of us.