The Government Shutdown Battle Is Over; Now The Real Soap Opera Ratings War Begins

Tyler Durden's picture

For some reason, much ado is being made about the nothing that is last night's 11th (or technically 10th) hour aversion of a government shutdown. As we pointed out last week, it is not as if this strawman outcome, or for that matter the raising of the debt ceiling was ever in doubt: "look for both of these events to be consistently spun as key
positive outcomes, even though the chance of these things actually not
transpiring in a non-favorable light is non-existent." And sure enough, we are confident that the spin of this outcome will be extremely bullish even if in reality it is the perpetuation of a baseline status quo, while the alternative would have been unthinkable. In the grand scheme of things, this was nothing more than a free episode of political soap opera.
The markets largely shrugged, because the Treasury Department still
would have been able to issue and service debt and the Fed would continues to goose markets higher courtesy of POMO.
Yet as Reuters points out astutely: "The battle over the U.S. budget has ended. Now the war begins. The debate over this year's budget that took the U.S. government to within an hour of a shutdown is only a dress rehearsal for bigger spending clashes to come." Here is what to look forward to, as the beltway entertainment spigot is cranked out to the max.

Within weeks, the government will bump up against the limits of its borrowing authority and will require congressional action to avoid a debt default that would roil financial markets.

At the same time, Republicans in the House of Representatives are targeting bigger game in their budget plan for the next fiscal year, which starts on Oct. 1.

Their proposal would slash taxes and overhaul Medicaid and Medicare, government-run health programs for the poor and elderly. It is likely to be rejected by the Democratic-controlled Senate, setting up another showdown between the two chambers.

That fight could last well into the 2012 campaign season, when President Barack Obama, one-third of the U.S. Senate and the entire House will face voters.

The budget deal agreed on Friday, if it passes Congress next week, would amount to the largest domestic spending cut in U.S. history.

That's a victory for Republicans who won control of the House in November on a promise to scale back the government and take a bite out of recession-bloated budget deficits that have hovered around 10 percent of GDP in recent years.

And now looking onto the next strawman: the hike of the debt ceiling. Look for much sound and fury on that issue too, which ultimately result in up to a $3+ billion hike to the ceiling, enough to carry America through to after the presidential election. Look for even moresound and fury as the debt ceiling is for the first time ever well above total US GDP.

 Treasury Secretary Timothy Geithner estimates the government could hit its current debt limit of $14.3 trillion by mid-May and has warned failure to raise it would be "catastrophic." Treasury could employ a variety of tricks to avoid defaulting for several weeks, but eventually it would run out of options.

An increase of at least $1 trillion is needed to keep the government running through the end of fiscal year on Sept. 30, according to a Reuters analysis. To last until the November 2012 election, the increase would need to be well over $2 trillion.

Raising the debt ceiling is always a politically difficult vote no matter the circumstances, but it will be a heavier lift for Republicans. Facing pressure from fiscally conservative Tea Party activists, they say they will not vote to raise the debt ceiling without significant concessions to slow government spending further.

That could force Treasury to spin its wheels for months while Congress works out a solution, said Ethan Siegal, a policy analyst with The Washington Exchange, which tracks political developments for investors.

"We do not know how that deal will be reached, or when it will be reached -- just that we believe a deal will be reached and that it will be very ugly," Siegal wrote in a research note on Thursday.

And in other upcoming sitcoms previews:

Next year's budget debate will not be pretty, either.

Democrats have already promised to block the Republican proposal to give states control over the Medicaid health program for the poor and turn the Medicare health program for retirees into a voucher system.

Democrats also have criticized House Budget Committee Chairman Paul Ryan's refusal to end tax breaks for wealthy oil companies or to propose other tax increases that many budget experts think are necessary to solve long-term fiscal woes.

And there will be a chance to reprise the recent fight over domestic spending, which focused largely on the discretionary programs whose funding levels are set by Congress each year.

Ryan is seeking another round of deep cuts in that area, which encompasses education, law enforcement, aid to the poor, and space exploration, but represents only about 14 percent of the U.S. annual budget.

In his plan for the 2012 fiscal year, Ryan would slice approximately $80 billion from those discretionary programs, while increasing defense spending about $28 billion.

"This is a big hit on non-security spending" on top of cuts already achieved this year, said one budget analyst and former White House budget official, who asked not to be identified.

The bottom line is that a few more billion will be cut here and there but nothing will ultimately change until such time as the bond vigilantes run out of [Insert insolvent country] is not [Insert another insolvent country] comparisons, and focus their overdue attention on the most insolvent country of them all.

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cosmictrainwreck's picture

An increase of at least $1 trillion is needed to keep the government running through the end of fiscal year on Sept. 30, according to a Reuters analysis.

Hence, the goal is survive to Sept 30. Ya think Timmah's in trouble?

 

Pool Shark's picture

 

Sound and fury signifying nothing...

They're just rearranging deckchairs on the Titanic, and arguing over what tune the band should play as we slip beneath the waves.

Meanwhile the banksters have rowed-away in all the 'millionaire special' lifeboats, leaving the rest of us to drown...

 

FreedomGuy's picture

"And sure enough, we are confident that the spin of this outcome will be extremely bullish even if in reality it is the perpetuation of a baseline status quo, while the alternative would have been unthinkable."

Exactly, right! The Republicans will fail, not because they don't have the right instincts but because they don't have the correct beliefs/ideology. Their fatal flaw is that they do not ask government to stop doing ANYTHING! The beast is left intact but perhaps a little hungrier for the minor budget cuts. To fully and permanently cut the budget and bring the U.S. fiscal universe into balance you must eliminate whole agencies and their missions. You then have to freeze any increases in Soc. Sec and Medicare. In fact, Medicare and Caid should go to a per person allotment or spending account. That's it.

When the Republicans fail I wonder what comes next. I thing there's a good chance of some sort total overthrow of the Republican party. I think Dems survive because they are the party of the State and there's always a large constituency for that.

jmc8888's picture

No the answer isn't that. (that's the answer to the people who want to cut services [why?] when the debt problem is a problem of legitimized fraud)

The answer is Glass-Steagall

Cancel the frauds, and you'll have TRILLIONS the gov't can utter for REAL projects that will enhance our lives AND the business climate (greater efficiency, more energy, more raw materials, and new stronger materials/superconducters, etc)

The answer isn't to cut social security, nor the EPA (although their whole Fascist Green crap has got to go....as the gas of life Carbon Dixoide, isn't the same as say Sulfur, TCE, etc). Thus the republicans are idiots.  Thus Ron Paul is an idiot.

The answer isn't to print for fraud.  Thus Obama, and the democrats are idiots. 

The answer WILL NOT come from dems, repubs, or the corporate Tea party. As all of them are idiots about the issue.  Cut....Print..WRONG!

Wipe out the debt that is causing the idiots to print or want to cut.

How? We used to do it, we had a standard in place.  We just need to bring back that standard, and actually apply it to all of bankster realm.

Glass-Steagall

Oh yes it will freeze the RMBS, CMBS, faulty derivatives, bogus bonds and bailouts, etc.  It will take these things off the books of everywhere, put it into one wind-down institution, and forbid these things to be traded, within the U.S.

If foreigners want to continue this crap, they should know that if the U.S. does this, they'll be bankrupted immediately, even if it takes a few days, or weeks to filter through the dipshits what it actually means.  But hey, they can implement these things to, and be saved like us.

Anything else, is pure idiocy.

BTW, this gives us the chance to like Hamilton, soak up the state debt, so state services no longer need to be cut. It gives us the chance to fund things like NAWAPA, fusion, space, mag-lev, machine tools, etc.

Also BTW, it gives us the opportunity to cut the bs, as I've said above, the bailouts, the corporate bankster wars, etc.  So as you see, once we right the ship, with Glass-Stegall there's still plenty of cutting, and spending we need to do. But ONLY, and I repeat ONLY Glass-Steagall will give us this chance. (of course it can be called another name, it's the principles within Glass-Steagall that matter)

You don't want no gov't, you just want to get rid of corporate bankster gov't.  Small gov't can be just as corrupt as big gov't.  So what you really want is a gov't...of, by, and for the people...and nowhere is size in that definition.  We the people decide.  We decided already, we want social security, we want healthcare, we want a level playing field, we want the gov't to issue safety standards, etc.

We just don't want the corporate bankster syndicate to be issuing our decrees on the above. 

Glass-Steagall will give us that chance, but we still have to then RUN IT correctly going forward.  So the idiot Repubs, dems, and tea party...need to wisen up, because even the solution can be fucked up, if we go back to being idiots and focusing on the wrong issues. 

Only the fools in their respective dem, repub, tea camps think THEIR way will solve it.  Nope, NONE of their ways will fix anything, in fact, following ANY of their paths, will make things worse.  Because with dems you get hyperinflationary death, with repubs/tea you get deflationary death ALONG with; big business killing you through reduced regulations, lower pay, very few gov't services, no heatlhcare, etc.

So either the dem path or the repub/tea path is idiotic, and will only make things worsethan they already are.  Only getting the idea RIGHT, that we have been a victim, willingly or not, of fraud, and taking the steps necessary to rectify that fraud by cancelling it, will give us the room we need to right the ship.  Then with our 'room' we need to address some very real problems as to do with water, energy, resources, and only big Manhattan style projects over decades, will we achieve true freedom. 

NAWAPA = Water, energy, and beginning terraforming

Mag-lev = efficient transportation, lower business costs

Machine tools = better products, efficiency, less waste

Fusion = virtually unlimited energy

Fusion arc = virtually unlimited resources of elements 1-92

We don't need to pay off fraud, or cut needed services, we need the above to get beyond REAL problems, and only Glass-Steagall and a commitment to the projects above (or like ones that achieve the same goals) will give us that. 

Anyone advocating a noticable different approach is pissing into the wind, and wasting their precious time on this Earth achieving NOTHING.  Remember that key fact, in the end, repub, dem, tea...achieve NOTHING that we need.  Because none of their ideologies actually get to the core of our problems, and since it's outgrowth of sophistry somewhere down the ideological line, it is just a 'waste of time'.

Fuck Obama, Fuck Boehner, Fuck Pelosi, Fuck Reid, Fuck Paul, Fuck Ryan, Fuck Christie, Fuck all the idiots that won't take the easy AND correct approach of grabbing the low hanging fruit that is Glass-Steagall and then not being afraid of using gov't to engage in these mankind saving projects. (no I didn't junk)

Zero Govt's picture

JMC8888   ..."The answer is Glass-Steagall"

Really? Tell me, how does any Law or Legislation change anything? Your starter for ten, you've got the whole of human history to work with, give me one fuking example of a single law or piece of legislation that has worked???

Does the law on murder stop murder? Does the law on drugs stop drugs? Did EU legislation saying bailouts were illegal stop illegal European bailouts? Do the warehouses full of financial regulations, including mis-selling, stop, arrest and convict the mass national mis-selling of sliced and diced mortgage fraud?

You find me a single f'n law or single piece of f'n legislation that works and i'll support your nonsense Glass-Steagall bollocks. Away you go...


weinerdog43's picture

Well, dumb-ass, it seemed we did pretty good for almost 80 years until regulation of the banksters was DEREGULATED by Gramm-Leach-Bliley.  Commercial and investment banks were held at arms length.  Christ you're a moron.

pods's picture

That is like saying that falling out of an airplane isn't bad.  It is bad until it is.

Deregulation was done because we could not issue debt fast enough.  It was needed.  Sure, some banksters made off with some nice unearned income, but the system needed a new avenue of debt issuance.

 

Sorry, but wherever mako is right now, he is smiling. 

The answer is so simple nobody will look at it.

The system is set up to crash.  It has to.  By issuing debt to cover p, but requiring p+I to pay it off needs constant debt expansion to survive.

Usually, there are cycles, and the banks just collect real property during the defaults.  But, we also have a political system that will not allow the necessary corrections in that system.  So the small defaults are put off until a big one comes.  It is big enough to take down the banks. So the gov steps in to cover the deflation.  Pretty soon we will see what happens when the gov and FED implode.

 

In short, it is nothing more than the system itself, working as designed that has caused us all our problems.

Issuing debt with interest is an exponential function.  You cannot have that work as we (as non-banksters) would like in a finite world.

pods

Cursive's picture

Sorry, but wherever mako is right now, he is smiling. 

I was just thinking of him yesterday.

Zero Govt's picture

Weinerdog

if you think we "did pretty good for 80 years" due to regulation then you need to chart that regulations and regulators increased, not decreased, over the time all the problems occured. We had a peak of 130 regulators no less looking at AIG, how did they do dumb-arse??? 

weinerdog43's picture

Well, dumb-ass, it seemed we did pretty good for almost 80 years until regulation of the banksters was DEREGULATED by Gramm-Leach-Bliley.  Commercial and investment banks were held at arms length.  Christ you're a moron.

Zero Govt's picture

Weinerdog

how did regulation contribute to the good 80 years? ...give me an example of a single regulation that aided the good times, how it helped any bwankers?

All regulation/regulators do is put a turd in the street for businesses to have to step around. It adds cost and time to the irrelevance of complying with red tape. And it's No.1 role of course is to allow vested interests to screw competitors

amazing how the staff between Govt, banks and regulators are so inter-changeable (inter-connected?). We're told regulators need 'experienced operatives'. Just the results of this 'experience' is not at all apparent. If by 'experience' they mean sitting their fat arses on files with global fraud in them and whistling Dixie then they sure are experienced at that.

Look how much Wank Paulsons 'experience' helped us when his former employer went bankrupt. He turned from (failed) policeman and (failed) oversight to criminal rewards for the success of bankruptcy. Another regulator 'confused' (conflicted) by their role ...where does the US Govt find these regulatory assholes???  

So the huge additions of Govt regulation in the past 30 years has in fact been a big part of the insestuous in-bred WS problem and which patently has not worked and is very evident in the banking crisis, dumb-ass 

Buckaroo Banzai's picture

Yes, exactly. Not only does regulation not work-- it creates the illusion of a level playing field. All investors MUST have a clear understanding that the game will ALWAYS be stacked in favor of the insiders, and that THE HOUSE ALWAYS WINS. The definitive case has been made, by both Hayek and Sowell.

http://www.marketoracle.co.uk/Article27329.html

When people fully realize this, they will of course abandon the stock markets, as they should. Publicly-traded corporations are a shitty place to put your money to work.

 

Zero Govt's picture

Buckaroo  -  your Gary North article is spot on. It says, "Corporate management is the Mob. It operates in terms of a system in which Congress serves as the enforcer, along with the SEC. Congress is not cleaning up the financial system, ethically speaking. The financial system is cleaning up by means of Congress."

My thoughts for a few years now. Regulation (in banking, media, healthcare/drugs to energy markets) is a protection racket for established fat cat monopolists. Regulation is fascism, nothing more, nothing less

FreedomGuy's picture

Agreed ZG. Put another way I like to ask, "How many regulations do we need until all of life is perfected and there is no more evil?" Conversely, "How many regulations does it take to make all of life miserable, impossible and all of us become criminals?" No one has answers but instincts tell us we are far closer to the second situation.

The corollary is "At what tax rate are all social ills resolved forevermore?" The truth is that we can tax everyone 100% and there will still be social ills and the modern liberal-statist-collectivist will still be mad and claiming how unfair life is.

I vote for the other direction. Give me freedom with all its attendant problems. We will do better.

NidStyles's picture

Too late for all of that. It was removed the Ponzi got out of control, and now nothing will stop it's collapse. Not even replacing the regulation's that you are advocating.

 

The game is over, grow up and get used to it, because none of your kicking and screaming that you are right will change that fact.

downwiththebanks's picture

Going back to Glass-Steagal would be a good start.  Taxing the hell out of the useless derivatives trade is another.  

Abolishing the Taft-Hartley is another.

There are so many ways in which Uncle Sam can collect revenue.  It's sad that going after the elderly and the poor are the only posited 'solutions'.

Zero Govt's picture

DownwiththeBanks  -  just a small point here but in order to tax an enterprise they need to be profitable. None of the banks you want to tax are profitable, they all went stone cold bankrupt in 2008 (hence a bailout)

If you think tax is a solution to problems, if not just your wish to use it as a tool of revenge, then come to Europe where suicide socialism now consumes up to 60% of national GDP. Tax has really 'solved' the economic problems here, another 2% out of GDP and i'm sure we'll all turn the corner from stagnant bankrupt zombie economies!

downwiththebanks's picture

If they're broke, why can they buy/sell/trade $1 quadrillion (that's = 1,000 Trillion) 'worth' of 'assets' every day?

If you're not going to shut down the insolvent TBTF, the least we can do is tax them on their turnover.

I pay taxes when I buy staples to live - why should they be absolved of paying taxes for their turnover?

Landrew's picture

Are you twelve? I don't want to live in You're country! My country is educated with an environment that is healthy, a workforce that is building the high value added goods and services. Your country is a country of ignorant slaves to low wage jobs without a future, where people (that don't include you) are secluded behind fences with bodyguards. I laugh when I hear people from the bottom talk like they are different than the people that surround them. You wouldn't be here if you were one of the lucky sperm club trust fund babies. The country you describe is a failed country without of future competing to be the bottom fucked of the world. I will take my research/education and income to a better country than you describe. No thanks to your dark and dirty world of failure.

pods's picture

Does your country issue debt at interest?

Then you are merely at a different point on the same timeline.

pods

Manthong's picture

My country issues bonds with negative yields called FRNs.

bruiserND's picture

You have it exactly right. I wonder why some dip shit flagged it as "junk"

 

One of my big time gurus is Davis from Hinde Capital in London. Metals exchange is there.Davis is a genius who writes very occasionaly. Davis said in mid October ,that the key to the global financial melt down was Japan and their bond market. He had no way of knowing then about the earthquake or the nuclear reactor. I alerted Tyler Durden at Zero Hedge of the article & they printed it. Demanded credit at ZH and BruiserND got the "hat tip" http://www.zerohedge.com/article/hinde-capital-chinas-stealthy-enforcement-gold-standard-and-wholesale-currency-dumping   He said just recently { week or 2 ago} that if gold went through 1,440 it was a moon shot to 1,800. Todays chart makes him look very smart.   Buy guns, food, ammo and physical gasoline, heating oil, propane , diesel now. Buy gold on the Labor Day pull back after it prints $1,800
smlbizman's picture

only in d.c, not spending as much is a cut....

Careless Whisper's picture

Instead of an annual deficit of $1,600,000,000,000 it will be only $1,562,000,000,000

everything's fine. move along.

downwiththebanks's picture

Deficit to whom?  

Lots of people holding US debt are free to go fuck themselves.

The banker-gangsters, for example, are perfectly free to do so rather than holding out in expectation of ever getting paid.

covert's picture

let the govt fail. it's the best public service.

http://covert2.wordpress.com

 

downwiththebanks's picture

Apartheid Israel attacks Iran before that happens.

If the deck is going to be reshuffled, Uncle Sam would rather have a world war than any other option.

Mentaliusanything's picture

You don't understand how it all works on a personal level.

It was a soap opera - The Senators look at each other beating their breasts but in the end if it wasn't passed they would not get their housing paid, their expenses paid for and OH MY GOD I won't get a Pay Check.

BLah Blah Blah - Self interest is the only Horse you back in the race of life. WINNER.. Ding... Ding... Ding.

DONE

 

Mentaliusanything's picture

Don't know much about him but I have a strong suspicion he loves his country and has stared into the abyss and seen enough to make him cry.

tallen's picture

I wonder what crazy number they'll put the number up to next. I bet Bernie Madoff is fed up, his ponzi scheme is nothing compared with that of the global economy.

Bought another 6KG of silver last week. I wonder what silver will be at the end of this week! JPM must be getting hit hard right about now.

breezer1's picture

they just need to print some more silly....

FreedomGuy's picture

I'm with you, dude. I am going to see about purchasing monthly. My first large purchase from last year has almost doubled. While I feel good about that I am actually sad for the reasons it is doubling. Let's all take physical or at least allocated deliveries and see if we can get the true price.

Traianus Augustus's picture

This is obama's greatest victory.  Chalk up one for the people.  Now he and his elite bosses can go on raping the rest of the country.

breezer1's picture

its about time the poor, elderly and sick paid. they have been living high on the hog for far too long. let them all join the armed forces or get jobs in washington.

Prof Gulliver's picture

Absolutely. And there's a lot of cleanup jobs available in Japan. Dimon is right: They should all stop their whining.   

Buckaroo Banzai's picture

Well, the problem is, they ARE going to pay, sooner or later. The spending has outstripped the ability for even "the wealthy" to pay for it, even if you took every cent they made.

rwe2late's picture

 The "deficit" is ended by

1) halting the trillions dollar bankster ripoffs

2) drastically cutting military spending (including Homeland insecurity)

3) stopping the subsidies for the health insurance and pharmaceutical industries

4) ending drug Prohibition,  and the mass incarcerations which only foster crime and unemployability (here and abroad).

5) adopting a sane immigration policy coupled with a sane trade policy that would not engender poverty and autocratic oligarchies in neighboring countries.

 - It is myopic to look at what is "unaffordable" only within the context of continuing the present irrational policies and wealth disparities.

Landrew's picture

My friend! I will gladly live in the country you describe:) This we can achieve with time and effort.

Why people think education is a waste of money is beyond me. I don't see the rest of the world striving for more war, less education, and a greater failure of an energy policy ha!

Count me in, may I write you in for November elections?

downwiththebanks's picture

TAX DERIVATIVES.

$1,000,000,000,000,000/day in turnover, TOTALLY untaxed.  Yet I pay tax on corn flakes and peanut butter.

A 1% banker-gangster turnover tax puts $1 trillion into government coffers in one day.

duncecap rack's picture

Bring on the welfare queen videos!

King_of_simpletons's picture

The whole thing was a fucking drama orchestrated by morons in DC of both parties. Any one here believe a shutdown would have happened with the current breed of crooks there ?

Pure and simple theatrics for the sheep on main street.

Bananamerican's picture

well, they do say (correctly) that "politics is show business for ugly people"

Oh regional Indian's picture

Well quoted Bananamerican. And to your point, note that the pivot point, the axis mundi, the locus of the focus was funding cancellation for Planned Parenthood.

Yee Haw, rust belt Ommer Rika (Last Reich in norse), feels Win-dick-ate-id! 

Surely this drama looked well-planned (parenthood not!!!).

Strange days.

ORI

http://aadivaahan.wordpress.com/2011/04/09/crashing-stars-they-were-but-chimeras/

Rodent Freikorps's picture

"In April, the annual report of Planned Parenthood Federation of America revealed that the abortion giant had a total income of $1.02 billion—with reported profits of nearly $115 million. Taxpayers kick in more than $336 million worth of government grants and contracts at both the state and federal levels. That’s a third of Planned Parenthood’s budget.

And what market-distorting results do we get for those government incentives? 289,650 abortions in 2006."

http://michellemalkin.com/2008/06/04/planned-parenthoods-obscene-profits/

And they qualify as a non-profit in the US.

 

DoChenRollingBearing's picture

$115 million profit / 289,650 abortions = $397 profit for Planned Parenthood per abortion performed in the United States.

Math.

SheHunter's picture

Take it out on planned parenthood perhaps but do not take it out on my many sisters who choose abortion over unwanted pregnancy.  Back off men.   You should have no, none, not any say whatsoever in this issue.  Done.

Green Leader's picture

It is known in USA Christian internet forums that the Great Nation has been sentenced to death by the Creator of the Universe. Revelations mention defeat by Russia and China. Abortions are a big part of the charges against USA.