Thursday, October 10, 2013

The Current State of Affairs

The Capitol is in shambles. Republicans and Democrats can't agree on anything. They're two drivers playing a dangerous game of chicken, with the fragile economy along for the ride. Pick up the newspaper, or go to a news channel. Both parties are furiously spinning everything they can to get public sentiment on their side in a battle that will lay waste to the fortunes of the American republic. This is the current state of affairs in Washington DC.

That is the current state of affairs according to a hyperbolic media and its easily susceptible audience. The reality is far more mundane. Both parties are showboating right up until last call. The actual cost of the PPACA in the first year of its implementation is probably going to be around 80 billion dollars. According to Democratic cheerleaders, the Republicans are holding the American people and government hostage to their ridiculous demands. According to conservative cheerleaders, this is all that separates the two parties on the Federal budget for fiscal 2014. 80 billion dollars out of a 3.6 trillion dollar budget, about 2.2%.

Surely 2.2% of Federal spending is not worth going to war over inside the Beltway. How could either Republicans or Democrats be so stupid as to hold the government hostage over such a paltry sum? They aren't. A look outside your window can give you confirmation that nothing has really changed, even as we head into day 10 of the "government shutdown".

The government shutdown hasn't seriously affected anybody who matters (if you're poor and on Federal assistance, it is troubling, but this is not a new state of affairs for the poor, the most readily exchanged chip on the political table). Some constituencies are affected at the margins but, all things considered, life goes on in the most prosperous country in the world.

Federal bean counters are ringing the alarm bells for October 17th, which is approximately the time when the US will hit the debt ceiling unless Congress raises it. At which point, the Treasury has about 30 billion dollars worth of money on hand to fund the government. The real date to watch is November 1st. That's when October's Social Security checks are due. If Congress can't reach a budget and debt ceiling deal by then, the single biggest line item in the Federal budget is Social Security. Payments will necessarily be halted or severely reduced.

That would create an uproar in the most powerful, most influential, and most motivated bloc of constituents in the United States. They will lift their geriatric fingers, dial their Representative's public line, and clog it with so much vitriol and disgust that even the most diehard conservative and liberal will have no choice but to raise the debt ceiling and call on the President to issue back payments.

But I think things will be resolved about 2 days after the October 17th soft deadline or even slightly before. This is a manufactured crisis in which everyone is culpable. Republicans, Democrats, journalists, the American public, everybody is to blame because everybody is content to let this thing play out as close to the hardest deadline as possible (November 1st) before properly conducting the business of the United States, which is to defend the country from foreign enemies and elements and dole out public money to favored constituencies.

That is the actual state of affairs in Washington.


  1. Pretty lazy piece. "Everyones at fault." Yeah fucking right.

    1. Diffusion of responsibility. If it's spread out, the less any one party feels compelled to act.

      Anyways, you're overlooking the main point of the article, which is that it's not a big deal and there is an actual deadline in which this "issue" will get resolved.

  2. You seem to misunderstand the gravity of the situation. First of all, the only side that is culpable is the one demanding uni-lateral concessions to reopen the government and avert default. The GOP has shown that they're only willing to negotiate omy with the threat of catastrophe around the corner in order to force Dems to give up something for nothing. In doing so they've united the Dems (something once thought impossible) in disgust and outrage at their reckless tactics, who refuse to give an inch lest they let the this type of hostage taking become a regular state of affairs in the future.

    Whats amazing is that the establishment knew this tactic wasn't going to work and yet still got dragged down into it. The old GOP guard is completely powerless, they've let the nuts take over the nuthouse, and now Boehner's only plan is to keep the government shutdown while pushing the debt ceiling back six weeks in order to satisfy the rabid tea party base.

    1. What exactly is the gravity of the situation? Market activity suggests that a temporary partial government shutdown/debt ceiling freeze will do nothing but disrupt short term economic activity. If the Republicans really have no power, then they will capitulate at the last minute. There is the threat of catastrophe and then there is actually catastrophe. Nobody with a significant monetary stake is thinking that a catastrophe is in the cards.

      As of yesterday's close, the 1 month Treasury bill has a .28% annualized yield. That's significantly above the 3 month's .05% but all that suggests is that this issue will be resolved without any significant fallout past a month.