Throwing In The Tea Towel: Government Shutdown Averted?

Tyler Durden's picture

A late afternoon update from Stone McCarthy's Nancy Vanden Houten provides some much needed clarity on the topic that will be next week's number one topic (absent another colored swan joining the clusterflock): the threat of a government shutdown. It appears that Obama's warning that it would "height of
irresponsibility" to shut down the government over a spending
battle may have pushed republicans to come to an compromise. From SMR: "Increasingly, it looks as though Congress will be able to pass legislation funding the government for the rest of fiscal 2011, which is now half over and ends on September 30." And naturally this is merely one more of those strawmen whose inevitable resolution will be seen as an upside catalyst even if the probability of a downside outcome is impossible: after all the US government can not afford a shutdown period. So the only natural outcome will serve as the latest piece of news to get the momentum algos ramping the market into overdrive even though there is nothing notably catalytic about this development.

From Stone McCarthy:

Despite pronouncements by Congressional leaders to the contrary, it appears as though the key parties involved have reached a tentative compromise on a deal to cut $33 billion in discretionary budget authority for fiscal 2011. That $33 billion would include the relatively painless $10 billion of cuts that were already passed as part of the last two continuing resolutions.

A final deal is by no means certain. The details of a compromise still have to be fleshed out. We've seen reports that Congressional staffers will be working through the weekend to iron out the specifics. Also, it's still up in the air whether a final bill will include any of the so-called policy riders that were part of HR1, the bill that cleared the House in February and that would reduce fiscal 2011 budget authority by more than $60 billion. Senate Democrats and White House officials involved in the budget negotiations have indicated they might be able to accept some "non-controversial" policy riders. Frankly, we've only seen Democrats identify those policy riders that would be off the table, including those that would eliminate funding for Planned Parenthood, NPR, and implementation of the 2010 health care law. We've seen conflicting reports about riders that would limit some of the authority of the Environmental Protection Agency. If Democrats refuse to accept any policy riders, it might give GOP leaders some leverage to push for spending cuts that are slightly larger than $33 billion.

The more conservative members of the Republican Party, including many in the freshman class, won't be happy with a deal that cuts 2011 spending by $33 billion. So the House Leadership will need a sizable number of the House's 192 Democrats to support a compromise. It appears, though, that House Speaker Boehner has decided that supporting a compromise that can pass the Senate is preferable to siding with the more conservative members of his party and provoking a government shutdown.

Will this create a lasting rupture within the GOP? At this point, we don't think so, but it might make it trickier for Speaker Boehner to get support for compromises on some of the bigger budget battles that lie ahead.

The positive outcome of this issue then opens the door to the next strawman catalyst: the proposed increase of the US debt ceiling, which also has no chance of not passing (the alternative is a default of the US), yet a favorable resolution will once again be spun as a market moving event adding another 10-20 points to the S&P.

We still project that Treasury will hit the debt limit on May 16, if it doesn't resort to the tools at its disposal to create room under the debt ceiling. Of course, we expect Treasury will use all means available to avoid breaching the debt limit.  We still expect that Treasury will have exhausted those tools and hit the debt limit on June 30. The forecast is subject to more than the usual amount of uncertainty, as we head into the all-important April 15 tax date (April 18 this year.) We expect Treasury to provide an update to its own forecast for hitting the debt ceiling sometime next week.

As we indicated earlier, on a purely technical basis, the US total debt already surpassed the ceiling, although loopholes such as incremental maturities of debt, bill redemptions, the "debt subject to ceiling" definition and other semantics will likely push D-Day until mid-April, ultimately depending on the dynamics of tax refunds and revenues over the next two weeks.

That said, 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.

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Ray1968's picture


Cut it or shut it!

Rainman's picture

yes...these assholes are choking on a gnat with an elephant yet to swallow. We are doomed. 

I think I need to buy a gun's picture

i noticed they truly aren't fighting amongst the two parties so we must be screwed.

Weisbrot's picture

bipartisan = 2 parties screwing 1 American public

Fish Gone Bad's picture

Here is a Clarkism: Anything I can destroy, I can control. 

That said, the Tea Party can shut down the government.  Why settle on a few $$$ when the entire purse can be controlled.  If any Tea Partiers read this, you know what to do, so please get it done.

SilverBaron's picture

Zero Hedge says we've breached it now.  Now they say that due to technicalities, we have until mid April.  Mccarthy says mid May.  So which is it?  One month is a huge gap.  Lets hear some specifics as to why this gap exists.

SilverBaron's picture

Lucy, you've got some splainin to do!

Ivan's picture

Free market fascism is the only sustainable free market system. Free markets are inherently unstable. That's not a bad thing, but economic cycles produce unemployment which can lead to revolution, or destruction of capital by the government to create demand for excess human supply (e.g. The Great Depression). If being poor and unemployed was a crime then revolutions/destruction of capital wouldn't happen. The first country to adopt free market fascism will experience huge economic growth because the bourgeoisie will be able to accumulate capital exponentially, and replace obsolete human workers with machines without any government intervention to protect the proletariat. In the end, such an economy will attain 90-95% of the world GDP. Everyone else will become mere natural resource exporters because keynesian/socialist/marxist economies won't be able to compete with free market fascism.

Free market fascism comprises 3 social classes:
The 1st (ruling) class consists of people who guard and regulate the system, and protect the capitalists from jealous proletarians (the artificially created middle class in the USA). If there are elections within this system, then only members of this class can vote. Though consulting the capitalist class is still possible. 1 to 10 million people are needed for this class. Tax revenue (approximately 10% of the GDP) from exploitation of capitalists is distributed more or less equally among members of the ruling class. They are the shareholders.
2nd class: capitalists, entrepreneurs, investors, speculators, lenders, rentiers, etc. Up to 1 million people.
3rd class: proletarians, including highly skilled workers, scientists and intellectuals. They are needed in the beginning, but most of them will eventually be replaced with machines and AI. Up to 100 million people.
Japan and Germany have huge economies, yet relatively small territories (less than 400,000 km2). In free market fascism a large population won't be needed either. A territory of similar size can be created (sea platform/artificial island), or the population of a country that nobody cares about can be displaced (Somalia, Colombia, Uganda, etc.)

KinorSensase's picture

I'd argue that capitalism, as it exists, is over-centralized in terms of selective pressures that serve to regulate the economy.  Is "free market" essentially referring to "self-regulating?"  I've always been of the opinion that it is, but I most certainly could be wrong.  If self-regulation (i.e., systems theory) is the defining feature of free markets, then IMHO we are over-centralized.  Using the accumulation of capital (greed) as the sole incentive for economic paradigms, coupled with energy sources as dense as fossil fuels, has pushed the factors that exert selective pressure on economies far too much toward centralized agents.

Self-regulation occurs as an emergent property of dynamic equilibrium (a defining feature of all living systems).  Dynamic equilibrium, in turn, requires a balance between centralized and distributed factors in terms of selective pressures on the system.  I believe that introducing greater distribution of capital (consider the reciprocal of "trickle-down" theory) would benefit our current economic system best if we wish to assume a self-regulating economy...though I don't propose the mechanisms to achieve this model.  I think it would increase entrepreneurship and competition, leading to diverse businesses with overlapping, redundant features, and ultimately more resilient and localized economies.

Fascism, as it appears in this video (and in common sense) would centralize capital even more, thus centralizing selective pressure on the regulation of the economy in ever fewer hands, yes?  If this is the case, the I'd wager incredible short terms gains based on free-market fascism and catastrophic long term losses.  Over-centralization (IMO) has already tweaked the balance of dynamic equilibrium in favor of short-term benefits over long-term and it appears that we're now crossing the threshold of those time periods, as marked by the passage of many black swans.  I think the free-market fascism model would only increase the magnitude of the very characteristics we should limit if we wish to re-approached economic homeostasis.


Note: "regulation" as I've used it has nothing to do with regulatory bodies or the classic sense of economic "regulation;" I use it in the sense of regulation within living systems (feedback loops, etc.)

knukles's picture

$3,500 B budget (or thereabouts for gov't work)
$33 B cuts

33/3,500 = .0094


That's less than the sum of rounding errors.
Great Job, Shithead!

Mission Accomplished
(Business as Normal)

nmewn's picture

Of course, we all know any "shutdown" is nothing but a paid vacation...once the "shutdown" is over everyone receives their pay for doing absolutely nothing again.

And I would go so far as to say a "shutdown" would be a positive on the patient under consideration...primum non nocere ;-)

Spineless Kabuki Theater of the Absurd.

Hulk's picture

Their entire existence is a paid vacation...

grekko's picture

You got that right.  Less than 1%.  And they can't even agree on that.  Babylon, prepare thyselves.  The end of the game is close.

masterinchancery's picture

Absurd.  Miniscule cuts, and nothing that matters in the govt ever shuts down, so the entire "threat" is complete BS.

philgramm's picture

The relationship between gov't and citizen is necessarily an abusive one. It takes a certain percentage of your hard earned labor from the citizen each year. It can increase that percentage without the citizen's consent. The reason it can do this is that it has set up a good cop/bad cop system and given the citizen the illusion of choice.

We all know how much Americans love being part of a team. We have a blue team and a red team. Pick one of the two but sorry you don't have other options. People staunchly defend their team regardless of its actions. Someone much more eloquent than me said "you can tell a lot about a society from what it values most". Well, We value sports more than we value our freedom. We will argue for years about a terrible referee call in a playoff game but we won't try to put in half of that time understanding and fighting for our freedoms.

Stop voting. Imagine if, in nov 2012, not one person voted for president. Not voting is also a choice. This abusive relationship needs only one thing from you. Opt out. The gov't has so much power because we are complicit in the system. We don't realize that we have voluntarily given away our freedom and we can get it back. An abusive relationship only ends when the abused just walks away. Walk away.

sorry if I ranted

flacon's picture

An abusive relationship only ends when the abused just walks away.


Excellent. And also stop paying income tax by stopping working. It is legal to not pay income tax if you don't earn any FRN's. Be self sufficient.

SilverBaron's picture

But it's not legal to not pay property tax, which must be paid in FRN's!  Not much power in being homeless.

Weisbrot's picture

defund illegals by evicting them, this will reduce traffic on the roads, reduce the witing time in hospitals, and the demand for food stamps, just to name 3.

Zero Govt's picture

Yep. Kick the can .....kick the can ......kick the can .....and kick the can (again!)

200 Committees, a new one on 'Fiscal Responsibility', hundreds of DC 'experts' and all they can come up with to 'solve' the debt and spending problem is the same retarded strategy of keep spending like bankrupts and kick the can

Govt, the rectum of every country

Phat Stax's picture

who the hell is going to change your sheets next time you wank off in a hotel room?  or pick your peas?  or strawberries?  Your son or daughter?  or your nephew or niece?  Yeah right...

espirit's picture

Straw Tea Bags taste like sheet.

JR's picture

It’s been said that most all subjects relate to politics.  But it’s also true that almost all subjects relate to economics; man working to provide for himself, his family and his future.  The heath care bill, of course, is political, but more than anything, it is economic.  And following right behind health care in the Obama Administration’s political agenda is another major economic issue—immigration.

Illegal immigration is nothing if not economic :

CHEAP TOMATOES? | Last year from a California school teacher - - -
As you listen to the news about the student protests over illegal immigration, there are some things that you should be aware of:

I am in charge of the English-as-a-second-language department at a large southern California high school which is designated a Title 1 school, meaning that its students average lower socioeconomic and income levels.

Most of the schools you are hearing about, South Gate High, Bell Gardens, Huntington Park, etc., where these students are protesting, are also Title 1 schools.

Title 1 schools are on the free breakfast and free lunch program. When I say free breakfast, I'm not talking a glass of milk and roll, but a full breakfast and cereal bar with fruits and juices that would make a Marriott proud. The waste of this food is monumental, with trays and trays of it being dumped in the trash uneaten.

I estimate that well over 50% of these students are obese or at least moderately overweight. About 75% or more have cell phones.

The school also provides day care centers for the unwed teenage pregnant girls (some as young as 13) so they can attend class without the inconvenience of having to arrange for babysitters or having family watch their kids.

I was ordered to spend $700,000 on my department or risk losing funding for the upcoming year even though there was little need for anything; my budget was already substantial. I ended up buying new computers for the computer-learning center, half of which, one month later, have been carved with graffiti…

I have had to intervene several times for young and substitute teachers whose classes consist of many illegal immigrant students here in the country less than 3 months who raised so much hell with the female teachers, calling them 'Putas' (whores) and throwing things, that the teachers were in tears.
Free medical, free education, free food, day care etc., etc., etc.

To those who want to point out how much  illegal immigrants contribute to our society because they like their gardener and housekeeper and they like to pay less for tomatoes: spend some time in the real world of illegal immigration and see the true costs. Higher insurance, medical facilities closing, higher medical costs, more crime, lower standards of education in our schools, over crowding, new diseases etc., etc., etc. For me, I'll pay more for tomatoes.

We need to wake up. The guest worker program will be a disaster because we won't have the guts to enforce it. Does anyone in his right mind really think they will voluntarily leave and return?

It does, however, have everything to do with culture: A third-world culture that does not value education, that accepts children getting pregnant and dropping out of school by 15 and that refuses to assimilate, and an American culture that has become so weak and worried about 'political correctness' that it doesn't have the will to do anything about it.

CHEAP LABOR? Isn't that what the whole immigration issue is about?

Business doesn't want to pay a decent wage.
Consumers don't want expensive produce.
Government will tell you Americans don't want the jobs.
But the bottom line is cheap labor.

The phrase 'cheap labor' is a myth, a farce, and a lie. There is no such thing as 'cheap labor’.

Take, for example, an illegal alien with a wife and five children. He takes a job for $5.00 or $6.00/hour. At that wage, with six dependents, he pays no income tax, yet at the end of the year, if he files an Income Tax Return, he gets an 'earned income credit' of up to $3,200 free. (The 2010 earned income credit [EIC] if the IRS worksheet amount is $12,550 for a single or married couple filing jointly with three children is $5,666, maxing out entirely at a $48,350 “worksheet amount.” The credit begins at $2 with $1 of worksheet amount and no children. These cash “amounts” do not affect welfare amounts determined for Temporary Assistance, Medicaid and Supplemental Security Income [SSI] and/or Supplemental Nutrition Assistance (food stamps and low-income housing.)

He qualifies for Section 8 housing and subsidized rent.

He qualifies for food stamps.

He qualifies for free (no deductible, no co-pay) health care.
His children get free breakfasts and lunches at school.
He requires bilingual teachers and books.
He qualifies for relief from high-energy bills.
If they are or become, aged, blind or disabled, they qualify for SSI.

Once qualified for SSI they can qualify for Medicare.
All of this is at taxpayers’ expense.
He doesn't worry about car insurance, life insurance, or homeowners
Taxpayers provide Spanish language signs, bulletins and printed material.
He and his family receive the equivalent of $20.00 to $30.00/hour in benefits.

Working Americans are lucky to have $5.00 or $6.00/hour left after paying their bills and his. The American taxpayers also pay for increased crime, graffiti and trash cleanup.

Cheap labor? Right! 

SilverBaron's picture

I have a friend who married a Vietnamese girl and they get the same treatment.  Free everything.  Free food, free housing, free college, free money to start a business.  It's crazy.  But as a white American, you get nothing.  He said her family told her not to take his name because then she would not qualify for the free stuff.  They are filthy rich. They own nail shops, apartment buildings, and mega houses, pay no taxes, and still milk the system for all the free stuff they can get.  I wish I was making this shit up.  He said the Laocian people are brought here even though our government knows that they are all addicted to opium.

SilverBaron's picture

Moral of the story.  If you want free shit change your name to Nguyen.

Yen Cross's picture

You are a gooood man J.R. When I get back from over seas I'm going to drive up in my red car and see you. You are too intelligent to be looked over! P.S. you called that usd/jpy dip! Tell Sue Ellen hello.

chubbar's picture

excellent post. Facilitating illegal immigration is federal policy at this point. No other conclusion can possibly be arrived at given the facts of the matter.

Obama again is pushing for amnesty even though it was soundly defeated in a bipartisan vote last year. Bush did nothing on his watch other than lip service. Reagan amnestied millions on his watch. Clinton did nothing on his watch.

The SPP/North American Union is fact. TPTB have already made provisions for Mexicans to be able to cross over into our country seamlessly. They are starting work on I-35 Nafta highway, even though it was voted down by the vast majority of texans.

Basically this policy is a crime in progress and there is really nothing we can do about it. Every time a bill is voted down they re-introduce it and wear down the public that is outraged by it, holding votes when opposing leadership is on holiday or some other gimmick. Or, they ignore the vote and just go ahead with the plans as is the case with the Nafta highway.

There is an agenda at the highest levels of U.S/world leadership and our welfare/sovereignty is not on it.

Hephasteus's picture

Illegal aliens represent the ultimate mind fuck of america. You're in but your not in and your not legit. It's the entire process of inclusion through caste system. There's no way they will shut down illegal immigrants any more than Apple will shut down their manufacturing system being ran by thugs who force people into cult concentration labor camps. Even if it means those same fucking thugs will do shitty things to apple like make an exta 300k plastic cases and sell it to a knock off vendor. It's just part of doing big thug business.

Manthong's picture

I think it's a gift.

More time to accumulate, more dips to buy in.

Great way to get excercise.

Those bars and green boxes are heavy.






YouBetYourLife's picture

It's hopeless.  Truly hopeless. The morons in DC still think it's some sort of power game.  They're arguing over who's going to get the window dining seating on the Titanic.

All that's left is for us who are aware of what's coming is to try to estimate when the financial tsunami will hit, so we can plan accordingly.

How do people grow up to be such pompous fools?  I really can't relate to this behavior at all.

sagerxx's picture

"It's all going down, man!  Martha Stewart's polishing the brass on the Titanic!"

In Fed We Trust's picture

An old Hindu proverb

"Do nothing so there is nothing left to undo."

That means shut the mothe fucker down!.

Turn the WH and Congress buildings into mueseums.

Hire Craig Newman to build a website that allows all to participate in a governement voted/decided by online voters. That means the bills are also introduce by common people.

Let the politicians keep their lives, except for the true perpertraitors, to be executed without trail.


Id fight Gandhi's picture

So cuts are less than one month of Pomo?

magpie's picture

shhhh, don't say that aloud. Cuts are two good days of it.

Once they begin to think in those dimensions, why should they even limit the deficit to single digit trillions ?

Debtless's picture

Go ahead and shut the fucker down.

victor82's picture

Shhhhh. Don't say shutdown!

You'll scare the Republicans!

YouBetYourLife's picture

Yes. Shut it all down. 

Give the sheeple a mild preview of what life will be like after the U.S. defaults. 

Except when the real default comes, it'll be 100x worse. People just don't get it.  You can't print Monopoly money forever.

rich_wicks's picture

What was this budget battle over?  33 billion was it?

Let me give you an idea of what that is, in the scope of our national debt.

Imagine our national debt is 14 trillion dollars and instead of 14 trillion bucks, it's 100 gallons of water.  What is 33 billion dollars in that context?

That's about 4 imperial cups of water in that 10 gallon bucket.  4 cups.  like that amount of water you drink in a day.


Our government, our incompetent government, filled with these moron and buffoons can't do without 4 cups in a 100 galloon bucket?  Removing that amount is "impossible"

Anybody have any idea how we're certainly screwed?  How there is no hope?  This is also 6 tablespoons out of 10 gallons - which is supposedly essential to keep this country from going crazy, supposedly, from these pilfering, spendthrift morons, who are looting the country, and are so freaking greedy that they can't give up 6 tablespoons in a 10 gallon bucket they've make.

Ya think people saying the dollar is doomed now are crazy?  Well, if you do, don't be whining 10 years later screaming "how could anybody see this coming? DUUUUUUUUUUUUUUUUUH!"  It's OBVIOUS.  Yeah, gold and silver are in bubbles, but this, well, just small bit of inflation are possible.

Buzz Hacksaw's picture

A little too simplistic. Bording on propaganda.

cossack55's picture

Of course. What isn't? Also, they are attempting to reach the "vast majority" on a level they may comprehend. Lewis black would have been a better narrator for sure. Still, kind of funny.

Two Face's picture

Yeah, in a $3.8T spending budget for fiscal 2011, this $33B isn't even good for a 1% cut of total spending.  The Dems and Repubs are squabbling over who's going to eat the last crumb of the pie.

A Nanny Moose's picture

Meantime the whole pie is turning into a moldy, watery, fetid shit pile.

Abitdodgie's picture

So it is time for a revolution I am up for it , when and where, and don't turn up if your not armed and ready to fight .

Creed's picture

dodgie? and you're going to fight? hahaha


johnnynaps's picture

Armed? try arming yourself with some common sense. The way to fight runaway capitalism/fascism is to do absolutely nothing.

Hmmmm, do you think the politicians (paid for by the corporations) want you to work more (keeping you distracted) for less? Everyone who has maintained a lackluster job the last 3 years is to blame. As long as you feed it, the beast will eat. Now, keep contributing to that 401k which supports a market based on corruption, greed, and capitalising on catastrophes......because your uncle sugar and ruling overloards tell you too, and they are there to help guide you! 

Cdad's picture

rich wicks,

Indeed, we are aware.  And if the weak Republicans sign onto this sad budget, then the bond market will immediately explain to them just how wrong they were.

So take your pick next week...of black swans yet again.  And while your waiting, prepare.