Today for only the 19th time in history, the US government has found itself in a "funding gap", a technical term for shut down. One of the reasons why this event is not being taken too seriously by the financial punditry, markets or much of the media, is that looking back not only have most government shutdowns been brief affairs, lasting less than 10 days - with the occasional outliers, such as the 21-day closure in 1995 and the 16-day halt in September 2013 - they have had little to no impact on either the market or the economy.
And yet, as Goldman writes, after the two political parties breached the shutdown Rubicon, there is a distinct possibility that this time the shutdown lasts "a few weeks" if not longer. The reason is one of both optics and motives: according to Goldman's political economist Alec Phillips, "both sides appear to think they could gain from a [lengthy] shutdown." He explains:
Democratic leaders appear to believe that a shutdown would highlight the DACA immigration issue, which a large share of the public, including a majority of voters who supported President Trump in 2016, generally support according to most public opinion polling (87% of the public and 79% of Republicans according to a CBS News poll released January 18).
Meanwhile "Republican leaders appear to believe that Democrats, who are in a good political position going into the midterm election according to generic ballot polling and other metrics, would suffer from a shutdown."
In other words, "If both sides believe the other side will be blamed, neither has the incentive to avoid a shutdown."
Making matters worse, there is nothing in the immediate future that will make conflict resolution an urgency: traditionally a drop in the market would serve as an incentive for political parties to reach a compromise, although as we have extensively discussed in the past year, risk assets no longer respond to political events or narrative. This means that without the market intervening as an "arbiter" - i.e., underoging a sharp correction - the two sides are likely to dig in and avoid any tangible negotiations, let alone a compromise.
As a result, while a bitter episode of fingerpointing has erupted, with both sides trying to make the other look like the villain, the US now faces the threat of a protracted shutdown with no end in sight.
* * *
In practical terms, events from the first day of the shutdown seem to confirm this scenario. As The Hill reports, Republican and Democratic leaders on Capitol Hill lashed out at each other on Day One of the government shutdown Saturday, trading barbs and casting blame "as a resolution to the funding impasse appeared nowhere in sight."
The rhetoric took a harsh turn, with Democrats complaining that President Trump is an erratic, unreliable negotiating partner and Republicans bemoaning Democrats’ intransigence over what the GOP sees as unreasonable immigration demands.
“Both sides are dug in. … I wouldn’t be surprised if we’re here tomorrow,” Rep. Bill Pascrell (D-N.J.) told The Hill after huddling with fellow House Democrats in the basement of the Capitol.
And, if Goldman is right, he shouldn't be surprised if he is still there in several weeks time.
There is of course, hope for a breakthrough: both chambers are in session Saturday –– a rare weekend workday when many lawmakers were griping about risking vacation plans and overseas trips. But it appears to be largely a day dedicated to theatrics and PR management: no votes are scheduled to reopen the government as the sides continue to air their grievances in press conferences and on cable news shows.
Meanwhile, with neither Republicans nor Democrats willing to budge, congressional leaders let the insults fly on Capitol Hill and it increasingly looked like the shutdown would run into the work week, furloughing hundreds of thousands of workers.
Senate Minority Leader Charles Schumer (D-N.Y.) told reporters trying to work out a deal with Trump was like “negotiating with Jell-O,” while House Minority Leader Nancy Pelosi (D-Calif.) used a floor speech to decry Trump’s “all-around incompetence” and “inefficiency.”
Schumer: “Negotiating with this White House is like negotiating with Jello.” (via CBS) pic.twitter.com/zGq2xiIGBc
— Kyle Griffin (@kylegriffin1) January 20, 2018
On the other side, Speaker Paul Ryan (R-Wis.) placed blame for solely at the feet of Senate Democrats: “One party in one house of this Congress is deliberately holding this government hostage.”
Trump also got involved in the spat using his favorite medium: “Democrats are holding our Military hostage over their desire to have unchecked illegal immigration. Can’t let that happen!” Trump tweeted.
Democrats are holding our Military hostage over their desire to have unchecked illegal immigration. Can’t let that happen!
— Donald J. Trump (@realDonaldTrump) January 20, 2018
But the most direct confirmation that nothing will change for a while came from Rep. Gerry Connolly (D-Va.) who after the House Democratic Caucus meeting said that he’s increasingly “pessimistic about reopening the government in any kind of expeditious way."
The reason? "Largely because of the intransigence of Republican leadership," he said even though it was the Democrats votes that led to the shutdown.
* * *
Meanwhie, and as further indication that the shutdown will last, neither party appeared to even agree on what should be the first step to ending the government shutdown. Republicans insist that the government should reopen before they would resume negotiations on immigration, a non-starter for democrats.
House Majority Leader Kevin McCarthy (R-Calif.), who has been in talks with Sen. Dick Durbin (D-Ill.) and House Minority Whip Steny Hoyer (D-Md.), said “we’ll go back to the table when the government’s back open." GOP leaders, particularly Ryan, have been adamantly opposed to attaching any DACA provision to a spending bill, saying it’s an independent issue that should be addressed separately.
Members of both parties have been in talks about shielding young undocumented immigrants from deportation in exchange for enhanced border security. The Trump administration first made plans to rescind the Obama-era Deferred Action for Childhood Arrivals (DACA) program last year, which granted temporary work permits for qualifying immigrants brought the U.S. illegally as children.
"We have been, and we continue to be, willing to work together in good faith on immigration,” Ryan said Saturday on the House floor.
Pelosi, meanwhile, insisted that lawmakers need to agree on parity between defense and nondefense spending, disaster relief, a path for DACA and other priorities before supporting another stopgap measure, or continuing resolution (CR).
“It’s no use having another CR unless we have the terms of engagement of how we go forward on the … parity, on the pay-fors, on the pensions, on the DACA and on the border security,” Pelosi said at a press conference in the Capitol. Many House Democrats are hinging their support for a CR on stronger assurances that DACA protections become law.
“Let’s say they give them a vote in the Senate. It doesn’t solve the impasse if Republicans in the House [don’t follow suit],” Rep. Luis Gutiérrez (D-Ill.) said Saturday. “This is going to take Speaker Ryan to say, ‘I will give them a vote.’ ”
In a word: chaos. And what's worse, now that the natural offset to any government shutdown no longer works, namely a market crash which tends to push both sides to the negotiating table quickly and efficiently, it is unclear what if anything with lead to a resolution from the current standoff.
Unless, of course, there is a market crash.
Going back to the Goldman analysis, the bank was sanguine on market risks, at least in the near-run. However, in case the shutdown drags on for weeks, it will get very messy. Here's why:
The main risk around the funding deadline is that it could eventually interact with the debt limit, which will need to be raised in March, we estimate. By resolving the DACA issue in the near term, this would reduce the risk that the issue comes back into play around the much more important debt limit deadline. Unlike government shutdowns, which financial markets tend to shrug off, markets could have a stronger negative reaction if the upcoming debt limit increase became entangled in the current set of issues.
In other words, should the government shutdown persist, eventually stretching into late February or even early March when the debt ceiling fiasco will also be on deck, then stocks just may do something they have not experienced in years - a drop of more than, gasp, 5%...
Comments
Close it down for a long long time, so that the Progressive cries of "Children will starve" will be shown to be as much rubbish as the Fusion dossier and Democratic integrity
Let the SHUTDOWN last FOREVER! That Zionist-infested rathole is only leading Americans and the world to catastrophe. http://bit.ly/2roAprH
In reply to Close it the fuck down for a… by knukles
Just kick out all the dual-citizens.
In reply to Let the SHUTDOWN last… by stizazz
Dug in like ticks.
Time to get out the surgical instruments.
In reply to Just kick out all the dual… by Croesus
Tiny tweezers time.
In reply to Dug in like ticks… by espirit
I was thinking tool of Barrett quality.
In reply to Tiny tweezers time. by shankster
Are we really going to believe polls at this point?
In reply to I was thinking tool of… by espirit
Shut down welfare payments and the Dems will be begging to open the Gov back up. Their constituents will light up the phones to the Dems.
In reply to Are we really going to… by Gaius Frakkin'…
Enough of the distractions
Release the fucking memo already.!!
#releasethememo
In reply to Shut down welfare payments… by Troglodyte Erudite
Gees I hope little cold doesnt turn into a default flu or anything, that would be bad for uncles reputation, hey are where are the rating agencies? Isnt this c cup terroritory??
In reply to Enough of the distractions… by BlackChicken
One can hope it stays shut down for forever.
In reply to Enough of the distractions… by BlackChicken
Shut down the fucking CIA and NSA.
In reply to Enough of the distractions… by BlackChicken
They fund themselves by improting the drugs for the sheep so they're okay.
National parks and all... that also fund themselves but that punish tourist are the perfect thing to shut down.
you see! America is playing hardball...
In reply to … by BennyBoy
The whole point of the Schumer Shutdown is to distract the MSM from talking about "the memo".
The "shutdown" is about starving children while "the memo" is just about "partisan politics" which "everyone hates".
Schumer will try to get the shutdown to go on for as long as possible until he can switch the narrative to the next progressive shiny object.
In reply to Enough of the distractions… by BlackChicken
a bit more toit.
djt has'm by the short n curlies.
https://www.youtube.com/watch?v=49Yl8
In reply to The whole point of the… by thebigunit
Interesting to see that this will be the Democrats last stand. We will see how it unfolds.
Tired of stories about "Dreamer X" who has had 20 years to get legal and when caught and deported, the TV cameras rush in to capture the tears and anguish and report "another family ripped apart". 20 fucking years to get legal. 20.
In reply to Enough of the distractions… by BlackChicken
I stopped reading at “a CBS poll”
#releasethememo
In reply to Are we really going to… by Gaius Frakkin'…
They’ll launch nukes before any member of the DNC does time.
They're all in.
In reply to I stopped reading at “a CBS… by yrad
You mean Oligarchs...
Steyer
Sussman
Shaw
please feel free to add more...
In reply to Just kick out all the dual… by Croesus
I'll go ahead and add all the frauds in congress. If there was such as a national mood ring it would show most people are delighted the govt is shut down. (Even though this thing here is fake)
Who are they trying to kid? They suck.
In reply to You mean Oligarchs… by Lumberjack
Turkey is bombing an airbase in Syria that ‘someone’ has been using to supply ISIS. Russia voiced concern about that particular base and China ain’t too happy about certain moves underway in China (near the Sino/Russian border) Paki Africa and India.
Shit gets real soon unless deep state gets reigned in pronto. Expect major false flags soon.
Prep accordingly. The assholes have lavish bunkers, we don’t....
P.S. Brit Bob prolly ain’t too happy about China doin bidness in Argentina either....
In reply to I'll go ahead and add all… by chunga
More:
http://www.xinhuanet.com/english/2018-01/20/c_136911346.htm
In reply to Turkey is bombing an airbase… by Lumberjack
Better be more specific pal.
In reply to Just kick out all the dual… by Croesus
Let the bad fruit die on the tainted vine - along with all the parasites who rely on it.
In reply to Let the SHUTDOWN last… by stizazz
double post
In reply to Let the SHUTDOWN last… by stizazz
Govt shutdown - yet another reason to be short the bond market.
In reply to Let the SHUTDOWN last… by stizazz
Since they're not working, we should stop paying them.
Fire all of them.
In reply to Close it the fuck down for a… by knukles
Hear hear, starting with the congress!
In reply to Since they're not working,… by Croesus
It's a distraction.
Release the Memo!
In reply to Hear hear, starting with the… by ReturnOfDaMac
@ Ex,
The Criminal FISA & NSA Deep State is the Foundation of the entire Tyrannical Lawless Surveillance State. Donald Trump has two choices.
Stay silent & admit its OK to Surveillance of a Presidental Candidate or not.
Stay silent & admit the absolute, Complete, open in your Faces
Tyrannical Lawlessness.
President will be Set as it was when the Pure Evil War Criminal Treasonous Seditious Psychopaths gave retroactive immunity to the Criminal Telecommunication (“Intelligence”) Companies which are part of the foundation & Insfrasturcture of
Tyrannical Lawlessness.
In reply to It's a distraction… by Ex-Oligarch
How 'bout release the hounds!
In reply to It's a distraction… by Ex-Oligarch
Here's a throwback for ya:
https://www.google.com/url?q=https://m.youtube.com/watch%3Fv%3DHtDvs4J0…
In reply to How 'bout release the hounds! by ReturnOfDaMac
I have hounds. Don't need to release them though. I live over a 1000 miles from DickCity and can smell the stench.
In reply to How 'bout release the hounds! by ReturnOfDaMac
The memo is from 2016. Does the fact that it was never mentioned before now (and after the NSA vote) make you feel more or less confident about its possible release? One would think Trump would have been screaming about this for the last year yet again, nothing. The timing of it's public mention says everything.
In reply to It's a distraction… by Ex-Oligarch
WHat are you talking about ??? They are always not working...
In reply to Since they're not working,… by Croesus
It'll be great to see those looking for the government checks (those serving the state, the welfare queens, and rent-seeking corporations expecting their subsidies) not get them for awhile and getting mad at the Democrats for doing it to them.
And ironically, it should be the GOP doing it. LOL Trump is winning!
In reply to Close it the fuck down for a… by knukles
THE ONLY THING THE FEDERAL GOVERNMENT DOES IS TO ARRANGE A TRANSFER OF WEALTH AT THE POINT OF A GUN, FROM WORKING PRODUCING PEOPLE TO THE ENTITLED NEGROES AND THE HORDES OF 3RD WORLD MUD PEOPLE THAT HAVE POURED IN HERE .... SHUT IT THE FUCK DOWN FOREVER.
In reply to Close it the fuck down for a… by knukles
Fkem!
In reply to Close it the fuck down for a… by knukles
Welcome to left wing bizarro world.
Where we shut down the government over illegal aliens and then claim 79% of Republican voters support it.
In reply to Close it the fuck down for a… by knukles
Meanwhile, customers at Whole Foods find out what a Communist takeover is like.
http://www.businessinsider.com/whole-foods-employees-reveal-why-stores-…
In reply to Close it the fuck down for a… by knukles
There is an opportunity here. This just means they can’t increase the debt. But the government still has $ 3.7 T of revenue coming in for 2018. So there is plenty of funds coming in for debt service ,social security etc. Now they just have an excuse to cut unnecessary programs and balance the budget. Unfortunately most of this could come from the bloated MIC which Trump and the Congress holds sacred. Sad
In reply to Close it the fuck down for a… by knukles
and no one in .gov goes unpaid thats just bs. they are getting paid to stay home and get drunk. wish i had that fuking job
In reply to Close it the fuck down for a… by knukles
shut it down and keep it shut
Democrats chose illegal invaders over citizens. Plain and simple .
Both sides choose themselves over citizens. Fixed it for you
In reply to Democrats chose illegal… by ChargingHandle
Trump chose American citizens over illegals. The democRATS chose illegals over Americans. And while you're at it, kindly clean your shit laden fingernails.
In reply to Both sides choose themselves… by dirty fingernails
What do you mean that you're not going to pay me to kill brown skinned people in foreign lands?
I must be working for the wrong crowd.
In reply to Trump chose American… by bornlastnight
You might want to check your facts, bub. Ain't nobody in DC choosing Americans. You must have missed how deportations are down under Trump or how the trade deficit has increased or how the tax cuts are temporary for us but permanent for the parasites. Maybe how Trump whined about illegals taking money from his beloved bloated MIC. Did you notice it wasn't from the wall or infrastructure or the deficit or anything that benefits us peons?
Don't scream at me and call me a faggot because you're loving Uncle Sam's cock up your ass as long as it's a Repuke doing the pumping.
In reply to Trump chose American… by bornlastnight
The Dims just cut funding to large swaths of their constituents in the bureaucracy , so there is that.
In reply to Democrats chose illegal… by ChargingHandle
BINGO! Most American's don't realize that the VAST majority of gov't workers (excluding 65%+ of military) are LIBERAL as fuck.
Anyone heard of Affirmative Action? That means gov't hires a very disproportional number of minorities and women.
I wonder if they will actually not pay the military? That happened at the 101st Airborne in the early 70's and the soldiers started shooting. You don't want to fuck with a soldiers pay. That will certainly get politicians, Shutdown Schumer, killed.
In reply to The Dims also cut funding to… by e_goldstein
Pagination