Government Shutdown/Debt Limit - Issues and Timelines for Investors

[CapitalistOppressor]

Sure, eventually. The memory of the people is short in our young country, and parties haven't had one constant ideological agenda throughout our history. During the end of slavery and the Civil War, the shoe was on the other foot. Lincoln was a Republican.

Will they get creamed in 2014? Probably if they keep this up, according to polls. Will they be gone for good? Nope.

I doubt they are really in danger of being creamed yet. But this isn't going to help, and they should be making big gains in a midterm.

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I think you are giving way too much credit to McConnell. He doesn't have that long of a leash with his primary happening.
If he is leading the charge for surrender, then he is going to become target #1 for the Senate Conservative Fund (aka Demint and Cruz and Redstate.com)

And I don't see any way that a short term CR or debt limit increase is through March. The House GOP will insist on a shorter term deadline so they can keep applying pressure to get entitlement cuts.

I would have agreed with you about McConnell's weakness a month ago, but lately its looked more like his Tea Party challenger is just too weak. The last poll I've seen had McConnell ahead by ~47 points -

McConnell poll shows big lead in primary

In contrast, the latest polls I've seen have him up only by ~4 points or so against his Democratic challenger, Alison Lunder-Grimes. I could well see him calculating that ending the shutdown is more of a political plus than a negative.

That said, I agree completely about the idea that he will get hammered by the Senate Conservative Fund. He just might be calculating that to be a positive for him at this point since his main threat is coming from the left right now.

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Also, just to be clear, the credit I give McConnell is for effectiveness. His personal power is quite limited because he is only the Minority leader. But he has consistently achieved outsized results with that power, and when he takes action he tends to be quite effective.

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Also, I should point out that despite the initial Washington Post story, McConnell appears to be operating more on the down low right now. There is very little in the media right now about the Senate effort, and the lead Washington Post story (which merges all of the storylines) has de-emphasized the Senate effort and buried it deep in the story.

That might indicate that I am personally out on a limb in thinking that it is an important development.

 

[Norse]

Well Asia is up, so they are hopefull a deal will go thru. I went allin with options earlier today. Should maybe have waited, but I do belive a deal will be closer after the weekend so no im gonna hold.

 

[borat99]

Asia is up because they saw that US was up today.

 

[CapitalistOppressor]

Well Asia is up, so they are hopefull a deal will go thru. I went allin with options earlier today. Should maybe have waited, but I do belive a deal will be closer after the weekend so no im gonna hold.

Unless the effort in the Senate is primarily an initiative by Susan Collins (who is a classic RINO like I used to be) then I still would hope for positive news out of the Senate. That said, so far the quotes are just Susan, while McConell is slippery enough to have not taken personal responsibility yet. Maybe he is just doing her a favor by counting votes.

 

[hershey101]

New York Times alert on my iphone said OB rejected offer

Same, CNBC alert on iPhone

 

[gregincal]

Same, CNBC alert on iPhone

Basically they jumped the gun and reported before anybody said anything about the meeting. I suppose it's all how you interpret things, but here's the official line:

"After a discussion about potential paths forward, no specific determination was made," said a White House statement. "The president looks forward to making continued progress with members on both sides of the aisle."

 

[mitch672]

This is an old article, but it's still valid..
Why the U.S. Can't Inflate Its Way Out of Debt

Last one out, please turn off the lights. Politicians still think they can magically solve our problems by printing more money. It's never worked for any other country, and it won't work for the U.S. either.
Whatever happened to "Ask not what your country can do for you, but what you can do for your country" JFK is spinning...

 

[mershaw2001]

This is an old article, but it's still valid..
Why the U.S. Can't Inflate Its Way Out of Debt

Last one out, please turn off the lights. Politicians still think they can magically solve our problems by printing more money. It's never worked for any other country, and it won't work for the U.S. either.
Whatever happened to "Ask not what your country can do for you, but what you can do for your country" JFK is spinning...

Mitch, i have to disagree with this article. The author confuses obligation with debt. The debt is a dollar amount that has already been incurred, and can be "inflated away". The future obligation is indeed indexed, and cannot be inflated away. This means that we can indeed inflate our way out of our current debt and the article is misleading, but we cannot inflate our way out of the debt that we will incur in the future. Thus, if we were to balance the budget today, and assume that we could match the indexed increase of all future obligations, then the current debt would eventually get really tiny due to inflation.
Unless you disagree with the above, then the article is flat out wrong and running the wrong headline.

 

[CapitalistOppressor]

Not a lot to go on today. There are intensive negotiations ongoing in the Senate, but there is not a deal yet.

The House Republicans are under intense pressure to keep the shutdown going, from heavy hitters like Heritage Action, to influential bloggers like Eric Ericsson at RedState.

With the collapse of their initiative yesterday, their conference is in turmoil. My guess is that they might try to go back to Obama with a really, really clean debt ceiling bill instead of the fake clean pseudo Ryan plan they offered yesterday. I still think the president will take it if it really doesn't have conditions.

What's clear is that the activists behind this want to clear the deck and focus on the shutdown and Obamacare.

This is just speculation on my part based on the bargaining incentives I see, so caveats aside, if the House leadership has been brought to heel, there might be some reluctance by Senate Dem's to accept even the minor concessions that Senate Republicans want because they are probably going to be worried the House will ignore an agreement in the Senate and just pocket the concessions before attempting to tack on other conditions.

So under that thesis, if the House isn't ready to fold, then it might be better for Dem's to just go back to the status quo and see what the House tries next.

 

[Norse]

It does tho seem like the republicans feels the pressure now, and want to make a deal fast? Atleast regarding the debt ceiling.

 

[Mario Kadastik]

So, what's the sentiment and any deadlines coming up today as it's Friday?

 

[Clemsons2k]

Based on the market I'd say sentiment is pretty neutral.

 

[Norse]

markets rallying again. Cant find any news.

 

[surfside]

i'm guessing it is based on the progress made between paul ryan and obama described in this article...

surfside

 

[FluxCap]

What this means is that the debt ceiling is likely to be raised without "concessions" as long as the White House and congressional Dems stand firm. Which they feel they must, because a failure to stop it is a tacit approval of more dangerous brinksmanship in Congress down the road. From either/any political party. Reid and Obama's position is that they must shut down this tactic as a permissible option for the future of the Union, not just for immediate economic reasons. Imagine if we had a Democratic House and Republican Senate with a Republican President. The Dems could turn around and do the same thing: deny funding for anything in government unless all of their wildest, most "socialist" demands were met. So, the current position of the White House is that this can't be allowed to exist as a tactic of negotiation in a functioning US government.

You cannot "trust" every news outlet you read, but I'm disappointed by this morning's post by Greg Sargent of the Washington Post, in which he seems to indicate that some unnamed Republicans still want to use the threat of debt collapse to force their policies on the country. The fact that there are no quoted sources saying anything remotely like the headline is reassuring and I think this is bordering on irresponsible reporting, but I don't like it when Greg Sargent says something like this.

I don't see the White House / Dems backing off of their stance that "we don't negotiate with debt ceiling threats / harm the country threats," so while before I was fairly certain Republicans would abandon this tactic under threat from their own funders in their own party as well as plummeting poll numbers, this article makes me question that very slightly. Not hugely, but some.

There is going to be a lot of noise from a lot of press outlets in the coming week. Try not to take any one article as gospel truth. Reporters are fallible and most of them write in a sensationalist manner to sell ads, so caveat emptor.

Again, we are not out of the woods yet. Trade carefully.

 

[Jonathan Hewitt]

45 minutes left to sell/hedge or go all in (or do nothing in my case?)! Place your bets!

 

[fjm9898]

Well there are no guarantees out there but i think this just sealed one up.
The shut down is for sure not going to last till Nov 1st.
VA secretary: If shutdown lasts until Nov. 1, benefits cease for 5.2 million veterans - Stripes - Independent U.S. military news from Iraq, Afghanistan and bases worldwide
I would not want to be the congressman responsible for millions of highly skilled killing machines being very upset.

 

[CapitalistOppressor]

As near as I can tell there has been no substantive change in the situation I described this morning, except that it is now clear that Paul Ryan is now basically in charge of the negotiation on the House side.

All of the happy talk in the press seems to have helped the market, but the fundamental truth remains that the president has not budged on his refusal to negotiate.

The problem here is that Paul Ryan is committed to using the crisis to extract major policy concessions. What's changed is that instead of Obamacare concessions he wants concessions on major budgetary policies, like entitlement reform.

This is a head scratcher to me from a political perspective, because entitlement reform has always been something that Republicans need bipartisan cover for, but this strategy turns that on its head. By doing this, they've switched from using a wildly unpopular strategy (shutdown/default) to extract concessions on a mildly unpopular policy (Obamacare), to using that same wildly unpopular strategy to extract concessions on the most popular government policies there are (Medicare, Social Security).

I fail to see why Democrats will cave in the face of this new "threat". Nevertheless, Paul Ryan is committed to it, and unlike Boehner he is actually a credible presence in these negotiations. Democrats at least have some reasonable assurance that Ryan can deliver votes, and I suspect that they aren't out there trampling all over this because they'd like to see if Ryan might just want to open strong with this absolutist push before backing off into an offer that might be acceptable.

If so, they wouldn't want to piss him off by trashing him in the press, because they want to give him the political space to climb down from all of this.

However, there is little time left in the calendar, so unless Ryan offers up a real clean debt limit extension (even if only a few weeks) soon, we'll probably see the Democrats go nuclear this weekend.

 

[Palpatine]

CO, despite the "popularity" of SS and Medicare, it should be obvious to anyone who is financially literate that they are both on an unsustainable path. It is crazy to be in favor of the do nothing status quo. That is the equivalent of dooming both of those programs to dramatic cuts in a few years. Anyone with any common sense would start moderating the growth path now before the bond markets force us to do it all in one year (see Greece example 2011-2012 on how that process works).

Cheerleading for the "do nothing" strategy of Obama seems very shortsighted to me. I fully agree with the Paul Ryan strategy that something needs to happen now. In the absence of a deadline, nothing ever happens in DC. They need to push harder on this or we won't have SS or Medicare in 20 years. Or they will be completely unrecognizable from their current form.

The side effect of the uncontrolled growth in mandatory spending is that is crowds out all investment. Roads, research, defense, etc. you see that on the discretionary side of the budget. Expect that to continue as long as we ignore the SS and Medicare problem. Less and less money for other important stuff, more money for senior citizen transfer payments.

 

[CapitalistOppressor]

CO, despite the "popularity" of SS and Medicare, it should be obvious to anyone who is financially literate that they are both on an unsustainable path. It is crazy to be in favor of the do nothing status quo. That is the equivalent of dooming both of those programs to dramatic cuts in a few years. Anyone with any common sense would start moderating the growth path now before the bond markets force us to do it all in one year (see Greece example 2011-2012 on how that process works).

I'll keep this brief because any debate on the subject is wildly off-topic and I don't feel like taking the time needed to fully debate this if my posts are just going to be tossed into the dustbin by mods 5 minutes after I post them.

But I will say that a couple of years ago I would have agreed with you that it was self evident that Medicare and Medicaid especially were on an unsustainable path. The reason being rampant medical price inflation that is bankrupting the country, even aside from what it is doing to the budget.

However, there now exists a significant and irrefutable body of evidence that medical inflation has been dramatically less than it has been historically for the last few years. There are many possible reasons for that, and no guarantee that it will continue.

But there are significant reasons to suspect that it might continue, and given the fact that our prices are drastically higher than literally anywhere else in the world, there is clearly no rule that prices will snap back to the a-historical trend that was driven by factors unique to this country. Especially when there is clear evidence that the industry is in flux and undergoing major changes.

The point being, we do not know what medical prices will be 20 years from now. If prices snap back to the historical trend the impact on the Federal budget will be unsustainable. If prices keep on the trend they have been on for almost half a decade now, then our problems are relatively minor.

Democrats are increasingly taking a wait and see attitude on this. Even if the CBO projections hold up and price inflation snaps back to the old trend, the debt itself will be stable through 2020. If current trends on price inflation hold, then debt will actually start to fall.

Either way, many Democrats don't see a need to act until the reforms that they believe are driving this have had more of an opportunity to take effect.

Anyways, if the mods want to move this that's fine. I at least managed to keep myself from posting graphs, lol.