With One Day Left, Reid "Not Nearly Optimistic" Shutdown Can Be Avoided: A Run Down Through The Implications

Tyler Durden's picture

The picture for the ongoing operation of US government is looking bleaker by the day. According to The Hill, "Senate Majority Leader Harry Reid (D-Nev.) said that he'd grown pessimistic since last night's meeting at the White House about the chances to avoid a government shutdown. During a speech on the Senate floor, Reid said that in the hours since a meeting last night at the White House with President Obama and House Speaker John Boehner (R-Ohio), he'd grown less optimistic that a deal could be reached to avoid a shutdown. "I am not nearly as optimistic -- and that's an understatement -- as I was 11 hours ago," Reid said." And while the adverse effects of a government shutdown are appreciated by all, the good thing is that such a move will likely freeze the financial picture of the government at a snapshot of Friday's terms. This will be in advance of a week of heavy bond issuance, amount to over $70 billion. If one were to add $20-30 billion in refund issuance, the debt ceiling (and we mean the real deal - based on debt subject to the limit) which now has an $84 billion buffer until breach as of yesterday, could be busted as soon as next week. What better way to prevent that than to shut down the government completely.

And for those wondering what would be affected in a shutdown, here is a convenient summary from Stone McCarthy:

Obviously, the longer a government shutdown lasts, the more disruptive it will be. Many government services would continue despite a government shutdown, including those related to law enforcement, defense and national security. Most benefits, including Social Security would be paid, although those claiming benefits for the first time or requiring other assistance from the Social Security Administration would probably be out of luck.

Many other services that citizens may take for granted would also stop. For example, it wouldn't be possible to get a passport or visa. According to an Administration official who briefed the press this morning, the IRS would suspend processing of tax returns that are not filed electronically. At this point in the tax refund season, that suspension would affect a lot of returns. As the tax season progresses, the number ff returns that are filed electronically tends to decline. Borrowers seeking mortgages insured by the FHA would have to wait for the shutdown to end. The Small Business Administration would also stop processing loan applications

Some economic releases would be disrupted under a prolonged government shutdown.

The release of economic data that is compiled by government agencies would likely be delayed. As a consequence of the 1995-1996 government shutdown, the December 1995 employment data wasn't released until January 19, and December 1995 retail sales data wasn't reported until January 30. (The blizzard of early '96 may have also played a role.) In some cases, it took a month or two for a normal release schedule to resume, even after the government shutdown ended. Economic data compiled by the Federal Reserve wouldn't be affected since the Fed isn't funded through the Congressional appropriations process. Also, data releases compiled by non-government entities wouldn't be impacted. An example would be existing home sales, which is reported by the National Association of Realtors.

Treasury auctions would not be affected.

According to a memo written by former Reagan budget director David Stockman in 1981, activities exempt from a shutdown include those "essential to the preservation of the essential elements of the money and banking system of the United States, including borrowing and tax collection activities of the Treasury." That memo was in effect, according to the Congressional Research Service in 1996, and we assume it would provide guidance for any shutdown that might occur in the current environment.

Significant numbers of federal workers could be furloughed.

In the five-day government shutdown of November 1995, 800,000 workers were furloughed. That number of workers amounted to just under 40% of the federal workforce of 2.04 million employees (excluding Postal workers, who would not be affected.) That shutdown wasn't a "full" government shutdown because three of 13 appropriations bills had been passed.

In the longer government shutdown of December 1995-January 1996, only 280,000 workers were placed on furlough; that's because another four appropriations bills had been passed since the November 1995 shutdown.

The White House official that briefed the press this morning said that about 800,000 workers would be affected by any shutdown that occurs after Friday. That seems to be smaller share of the federal workforce than was affected in 1995-1996 shutdowns, which were partial. Perhaps a larger number of federal workers are now deemed as essential, which wouldn't be surprising, given stepped up security efforts and our involvement in two wars. (Recall in 1995-1996, there was no Department of Homeland Security.)

Those workers who are furloughed during a shutdown don't get paid (Congress and the President still get paid) during the shutdown. In the past, they have received retroactive pay once they return to work, although our understanding is that Congress must act to make that happen. In other words, the retroactive pay is not automatic.

In other words: the POMO/equity MOMO party will most certainly continue even as most non-stock market speculators find their lives just modestly inconvenienced.

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baby_BLYTHE's picture

I am going to defend Gonzalo Lira and other Hyper-Inflationists (They are right!).
note: I posted this before. People need to wake up!

I went to a bar near Arizona State University with my friends over Spring Break.

Get ready for this... you cannot make this sh*t up (picture I took with my Andriod)

http://i51.tinypic.com/343mbrn.jpg

Get ready, folks!

We are going into an inflationary Depression! Tyler was right. The dollar is in BIG TROUBLE!

Thankfully I own Gold and Silver, I advise you all take precaution. This shit is f***ing real! It is unbelivable.

Hard times are coming. For everyone!

 

Haywood Jablowme's picture

Hey Reid, shut the mother fucker down bitch!

Put your worthless fiat paper where your mouth is....on Billary's man-gina.

Bankstas, Elitists, and Congress, your fuckin' time is comin'...

 

 

krispkritter's picture

 

"Billary's Man-gina"...ROFL...Now where's the brain bleach...?

 

andybev01's picture

please pass the mental floss.

baby_BLYTHE's picture

Too bad a Government shutdown doesn't involve Wallstreet.

No doubt the market would scream higher as a shutdown and all other forms of Armageddon are "priced in".

What a sad pathetic joke!

krispkritter's picture

Too bad the worthless Congress and Prez are still paid even though it's their inaction that puts 800k other people's paychecks at risk. Congress-critters should receive $1 per year to serve and the Prez can pay for his own tee times...

rufusbird's picture

I know on thing that would get these elected officials to pass a budget on time. Make a law that makes any congressman who is in office during a year when a budet is not passed on time, inelligible to run for office on the following election term. The country could use a clean slate of elected officials.

Jay Gould Esq.'s picture

Frankly, this makes for sensational headline, but we all know that Uncle will never be locked out of his own house. There will be no shutdown. Bawlin' John Boehner simply cannot handle the stress from the aggressive likes of Katy Couric and Mika Brzezinski. 

Winners: AFSCME, Barry, Harry, Nancy, and Bawlin' John ( the perma-tan is preserved ).

Losers: Taxpayers the nation-over.

flustercuck's picture

blocked @ work! how about a summary...

baby_BLYTHE's picture

tiny pic is blocked?

They decided that the dollar bills weren't worth holding onto and went ahead to make an art project out of them. A ceiling design with defaced Federal Reserve notes dangling for all to see.

flustercuck's picture

thats awesome... will have to check it out when i get home. maybe in a year or two we'll all be redecorating our homes with benjamins...

 

full disclosure: long wheelbarrows

 

Andy_Jackson_Jihad's picture

Its a way for drunk people to post messages instead of writing directly on the wall with a sharpie.  I've seen it before in hawaii...probably happens anywhere drunks congregate on vacation.

  I figure the bar owners avoid having to peel stickers and sharpie off the establishment and the graphiti is still worth a dollar.

However, a good one I saw in Hawiaii was: "Your money is shit - dan from Australia"

j0nx's picture

Describe how we can go into a hyper inflationairy environment without a corresponding rise in income? Incomes are flat and/or declining and most of that reason is due to globalization. Why pay an American $20hr to do the same thing that a Chinaman will do for $.50 an hour? Hence there can be no hyper-inflation without wage increases to match it. What we have here is something far more sinister. Hyper-biflation maybe. All the corresponding negative effects from the rise of commodity prices  without a rise in income to pay for them. Let's also not forget about the drops in property values and other assets that you own in an environment like that. People will be begging for the good old days of hyper-inflation after this starts to run its course. I don't think that we will ever see a corresponding rise in incomes from this even as people have lost total faith in the currency and in their government; which typically is the end game for a hyper-inflationairy environment scenario.

j0nx's picture

Uh did you even read That Willie article? Let me post a paragraph for you which is exactly what I wrote and exactly how I feel this entire thing shakes out as well:

"My point made consistently is that wages will not keep pace with rising costs, even made a national priority to halt the secondary inflation effects on wages. In that sense, my analysis has joined the Deflationists, but only with one foot in their shallow pond of constructs, hardly qualifying as a School of Thought. Since wages do not keep pace with costs, the unemployment will rise and has risen, a point made consistently here. Therefore my work cannot be carelessly labeled as over the top inflationist. Sadly, most Deflationists do not understand how to read my analysis, because they operate with a blind eye to the many sided crisis, too focused on his narrow perspective that cannot adapt to the current complex situation. The Deflationists cannot integrate into their shallow thinking the combination of inflation on the monetary side and deflation on the asset (and wage) side, surely a difficult and extraordinary situation loaded with complexity. They lost my respect long ago, the entire clan. Most of their followers in paid subscription services suffered crippling personal financial losses. A few analyst newsletter writers from their camp have learned nothing and continue their tired saw with shallow analysis and a string of wrong-footed forecasts. So be it!"

I am certainly not a deflationist but I sure as hell am not a hyper-inflationist either. There can be no HI without wage increases. PERIOD. I have always been a believer in the fact that we get the worst of it which is massive inflation in things you need and massive deflation in things you own or want but don't need.

NidStyles's picture

You do understand that it's not the Individual wages that must go up, but the aggregate of wages. Unemployment, food stamps, handouts as the Social Welfare system kicks in. All of that would have similar effects.

Bearish News's picture

Wages will rise. Just not keep up with inflation. Brits just raised minimum wage 15p to 6.08. Inflation? Hell of a lot more than that.

Shitters_Full's picture

Dude, please...'Chinaman' is not the preferred nomenclature.

j0nx's picture

STFU dufus. Chinaman Chinaman Chinaman. If you want political correctness then go to the yahoo forums.

JS1234's picture

He was posting a line from a movie.

j0nx's picture

So was I. GD amateurs. And btw, I hated that F'ng movie.

Shitters_Full's picture

Well that's just, like, your opinion, man.

JustPrintMoreDuh's picture

No problem comrade!

Just raise the minimum wage and kick the printing presses into quintuple SUPER-DUPER hyper overdrive.

 

Nels's picture

Inflation without wage increases?  Easy.  A large chunk of the population gets their money from the government.  Just keep increasing the amount of transfer payments and the number of folks getting such payments, and fund that with the Fed printing press.

It doesn't matter if it's wage earners who get the cash, as long as there are enough folks getting the cash to get into bidding wars.

jus_lite_reading's picture

You can say that again! The shit is real. Perpare now. Guns food water silver gold potassium iodide

Urban Redneck's picture

College bar with $1 bills...  Go to the west end of London, the Guards' pub if my memory serves.  They have a much better selection- there should still be one of the bank notes below up on the ceiling, when it was added, the penalty for exporting them was death.    

 

http://aes.iupui.edu/rwise/banknotes/guinea/gui017_f.jpg 

earnyermoney's picture

OT. How's Herb in the land of the Sun Devils?

covert's picture

it should not be mislabeled. it's not a shutdown but a trim down. people always try to order more govt than they can afford.

http://covert2.wordpress.com

 

High Plains Drifter's picture

if the welfare and unemployment checks stop coming, the cities will burn.....

jmc8888's picture

ROFL that's just the bar scene in scottsdale/tempe

Not saying you're wrong overall, just scottsdale/tempe bars are a different beast.

StychoKiller's picture

Get back to us when the ceiling is papered with Benjis...

NOTW777's picture

not "bleaker"

its hopeful to shut down evil

libs are exposed - they have no interest in even trying to cut

Careless Whisper's picture

Federal Reserve Bank is a private entity, not part of the gov. Nothing to see here, move along.

romanko's picture

My theory is the regime wants a govt shutdown to facilitate a QE3 - the impact will be broader but less damaging to Wall Street than an orchestrated stock market crash - after a week or so, they'll say "look, the gov't can't continue to send out cheques without QE" and everyone will clamour for more printing, because the reality is that the gov't deficits cannot be funded without QE

SheepDog-One's picture

I'll be applauding! And at some point soon this charade of 'we need to print daily to pay american sheeple free checks so they can eat and stay calm' will end!

And dont be so sure another crash can be so easily arrested and re-levitated, theyre freakin HORRIFIED to see even a suggestion of red at any time! Why?-

Let me ask you what happens if theres a big market plunge and all the 401K holders get the idea they all want to dump at once? This isnt all as bulletproof and sure thing as the satanistas want you to believe!

Cdad's picture

Let me guess...the convenient excuse to sell the market into oblivion...while still telling the sheeple to buy the dips because historical valuations look cheap, and a fabulous April is on the way for retailers...who currently suck...but never mind about that because UnicornDew is freakin' everywhere?

Do I have it right?

 

SheepDog-One's picture

Drownin in freakin unicorn dew!

bigdumbnugly's picture

when they do shut down government, hopefully curly, larry, and moe will step into the void to restore some semblance of sanity to it.

SheepDog-One's picture

STOP threatening me with a shutdown, gooberment! DO IT! Im beggin ya!

Ruffcut's picture

Yeah, Make my day! Bitchez

Dr. Porkchop's picture

It's like Boehner putting a gun to Obama's head, or vice versa, and threatening to pull the trigger if he doesn't get his demands.... they don't seem to understand that in either case, the crowd is shouting "Do it!"

StychoKiller's picture

Yea!  Whatever you do, PLEASE don't throw me in dat briar patch!

JS1234's picture

The Dems won't cut spending, the Repubs won't raise taxes.  They'll have their fingers around each others throats the entire time the whole country comes crumbling down around them and then they'll point fingers at each other.  Since I'm OK with the entire thing crumbling down, I say yea stalemate.

NOTW777's picture

why would anyone agree to raise taxes and feed corruption and fraud

Urban Redneck's picture

neither whore wants to lower their offering price

StychoKiller's picture

Very few adults in Congress/Senate; alas, NONE of them are in positions of power!

The Axe's picture

FUCKING EARTHQUAKE

umop episdn's picture

http://earthquake.usgs.gov/earthquakes/recenteqsww/Quakes/at00ljadqj.php

"144 km (90 miles) ENE (68°) from Fukushima, Honshu, Japan"

 

"7.4 (Preliminary magnitude — update expected within 15 minutes)"

terryg999's picture

I think the libs fear a shutdown a tad bit more.  Most people won't notice that the precious goverment isn't there - and that scares the libs just a little bit more then the repugs.

 

Note the media playing up the horror of a shutdown