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Bipartisan Budget Deal Reached; No Extension Of Unemployment Benefits Means Unemployment Rate Set To... Plunge

Tyler Durden's picture


Moments ago, news hit that democrat negotiators Patty Murray, and republican Paul Ryan reached a bipartisan deal to ease the automatic budget cuts by $60b. The deal calls for auctioning of govt airwaves, increased premiums for pensions backed by PBGC, a congressional aide told Bloomberg’s Heidi Przybyla. A press conference will be held at 6pm to unveil the bipartisan budget agreement, according to e-mailed statement. As a result, a January 15 government shutdown will be avoided.

More from the AP, via NBC:

Congressional negotiators reached a modest budget agreement Tuesday to restore about $65 billion in automatic spending cuts from programs ranging from parks to the Pentagon, with votes expected in both houses by week's end.


Officials said the increases would be offset by a variety of spending reductions and increased fees elsewhere in the budget totaling about $85 billion over a decade, enough for a largely symbolic cut of roughly $20 billion in the nation's $17 trillion debt.


Among them is a requirement for federal workers to make larger contributions to their own pensions, as well as an increase in a federal security fee that would add $5 to the cost of a typical roundtrip flight.


Officials said Democrats had failed in their bid to include an extension of benefits for workers unemployed longer than 26 weeks. The program expires on Dec. 28, when payments will be cut off for an estimated 1.3 million individuals.


Announcement of the deal came in the form of a statement that the two negotiators, Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., who planned a news conference to announce details. The lawmakers chair the budget committees in the two houses of Congress, and negotiated the deal in secretive talks over recent weeks.


Officials said that under the agreement, an estimated $65 billion in automatic spending cuts would be restored through the end of the next budget year, which runs to Sept. 30, 2015.


Officials who described the details in advance of the news conference did so on the condition of anonymity, saying they were not authorized to speak on the record.


The same was not true of conservative organizations, which attacked the proposal as a betrayal of a hard-won 2011 agreement that reduced government spending and is counted as among the main accomplishments of tea party-aligned Republicans who came to power earlier the same year in the House.


Americans for Prosperity issued a midmorning statement saying that GOP lawmakers should uphold current spending levels. Otherwise, the group said, "congressional Republicans are joining liberal Democrats in breaking their word to the American people to finally begin reining in government overspending that has left us over $17 trillion in debt."


A day earlier, Heritage Action issued a similar broadside, saying it could not support a deal that "would increase spending in the near-term for promises of woefully inadequate long-term reductions." The group played an influential behind-the-scenes role earlier this fall in events that led to a partial government shutdown, supporting a strategy of refusing to provide needed funds for federal programs until the health care law known as "Obamacare" was defunded.


For their part, liberals were unhappy that the deal was likely to lack an extension of benefits for unemployed workers more than 26 weeks off the job.


The party's leader, Rep. Nancy Pelosi of California, said at one point last week that her rank and file would insist on an extension for the unemployment program as a condition for supporting a budget deal.


The White House pointedly refused to support her position, and she later made additional comments that her staff characterized as a clarification.


Given the internal GOP divisions in the House, Speaker John Boehner is likely to need Democratic votes to approve any deal by Ryan and Murray. It was not immediately clear how many Democratic lawmakers would support a plan that lacked an extension of unemployment benefits.


Some Democratic officials suggested a possible two-step solution. It included swift passage of any budget agreement that emerges, and then adding an extension of unemployment benefits to must-pass legislation early next year, perhaps a measure to reverse a looming cut in payments to doctors who treat Medicare patients.


The bipartisan push for a budget agreement stems from automatic cuts that are themselves the consequence of divided government's ability to complete a sweeping deficit reduction package in 2011.


If left in place, the reductions would carve $91 billion from the day-to-day budgets of the Pentagon and domestic agencies when compared with spending limits set by the hard-fought 2011 budget agreement.


Support for a deal to ease the reductions is strongest in Congress among defense hawks in both houses and both parties who fear the impact on military readiness from a looming $20 billion cut in Pentagon spending.


The White House wants a deal for a same reason, but also to ease the impact of automatic cuts on domestic programs from education to transportation to the national parks.

Since there was a failure to obtain an extension of benefits for workers unemployed longer than 26 weeks, it likely means that, as explained before, the labor force is about to collapse by up to 1.3 million, paradoxically leading to an even faster drop in the unemployment rate. Recall:

If the Congress does not pass the bill to extend emergency aid - set to expire Dec 28th - then up to 1.3 million more people will be added to that list of 91.5 million already our of the labor force (and another 800,000 more to come in further months)...


This has profound implications for the oh-so-important unemployment rate that  the Fed is so dependent upon...


JPM's Feroli: One observation that could set an upper bound on thinking about a participation effect is to hypothesize that all 1.3 million EUC claimants exit the labor force after benefits expire in 1Q (again, should Congress allow that to happen). In that case, the unemployment rate would fall by 0.8%-pt, obviously an extreme example. Some of the Fed studies can help to narrow the range of outcomes.


One of the more recent works (Farber and Valletta from the San Francisco Fed) indicates that about a fifth of long-term unemployment is due to extended benefits. With just over 4 million long-term unemployed recently, this would imply that the absence of extended UI benefits could lower the unemployment rate by 0.5%-pt.


This will directly impact the Fed's credibility to manage the economt in a "data-dependent" manner:


JPM's Feroli: Setting aside the normative aspect of whether from a public policy perspective this is a desirable or undesirable outcome, such a fall in the unemployment and participation rates could create some tricky choices for Fed policymakers as they assess the health of the labor market.


Remember, while consensus is convinced Taper is a positive (the Fed wouldn't pull back unless everything is golden); we suspect, and today's Treasury Auction Failure supports that thesis, that the Fed is looking for excuses to Taper (or shift policy away from QE)...

Finally, as a result of the implicit $5 billion a month fiscal boost, a near-term modest taper is now even more likely.

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Tue, 12/10/2013 - 19:05 | 4234100 wisehiney
wisehiney's picture

Be careful you R's who are up in 2014. We are watching. TEA.

Tue, 12/10/2013 - 19:08 | 4234108 PRO.223
PRO.223's picture

So, just two idiots agree and now there will be no govenment shutdown?

Tue, 12/10/2013 - 19:11 | 4234118 MarsInScorpio
MarsInScorpio's picture

It also shows that they are beginning to sell everything that isn't nailed down, in this case in the lead article, the airwaves. I can't wait to see what other assets they are selling - reminds me of Greece. . .


Tue, 12/10/2013 - 19:15 | 4234131 nasa
nasa's picture

Sounds like the IMF is making magic happen once again.

Tue, 12/10/2013 - 19:47 | 4234202 JPM Hater001
JPM Hater001's picture

Sounds to me like Libertarians are going to have a field day in 2014 elections.

Fuck you Paul Ryan...and Im from Wi so it actually means something.

Tue, 12/10/2013 - 20:02 | 4234233 knukles
knukles's picture

I love the logic of sales of assets.  US airwaves, like UK's gold.
To cut an ongoing deficit.
But but but but... once sold can't be repeated, so is a laxative for the last Vicodin, not the next.

Without spending cuts, it makes no fucking difference.

That's right, just spend some more money we don't have and declare victory
Are these fucking people crazy?
Well, yeah....


Same Old Shit

Taper my ass.

Tue, 12/10/2013 - 20:03 | 4234253 nmewn
nmewn's picture

Sons of bitches would sell off their own children for another year in power.

And thats just what they did.

Tue, 12/10/2013 - 20:08 | 4234265 knukles
knukles's picture

The Republican Establishment is at War with its Own Base.
Any crap like this approved by the R's is going to further widen the schisms for 2016 solidifying HillBillary's predidency.
Yeah, I know it's all the same red blue crap, but these progressives are fucking everythi9ng up royally.
I mean, possibly beyond repair.
We've likely transited the event horizon and are headed for the singularity of time disappearing....


Tue, 12/10/2013 - 20:22 | 4234301 zaphod
zaphod's picture

Things are going to get worse than people currently alive remember, they are running out of ways to keep the system running, when in fact it needs a hard structural reset. From that view a HillBillary's predidency to take the fall is fine with me.

Tue, 12/10/2013 - 20:30 | 4234325 nmewn
nmewn's picture

Yes, they are pissing on the base. They have to do it before Wed under regular order or they risk not getting out of town for their Christmas vacation...by going outside "the rules" and debating anything.


Tue, 12/10/2013 - 21:13 | 4234481 Blano
Blano's picture

The schism just opened up again here in Texas IMO when at the last minute Congressman Stockman filed to challenge Senator Cornyn.  Should be entertaining.

Tue, 12/10/2013 - 22:17 | 4234706 Colonel Klink
Colonel Klink's picture

Just look up Executive Order 12803!

Wed, 12/11/2013 - 09:32 | 4235631 kralizec
kralizec's picture

Think that is bad?  This shit scares me more...what has been done before can be done again!




But it's all bad...there is no good...the only good is purging and starting over!

Wed, 12/11/2013 - 06:10 | 4235364 Drifter
Drifter's picture

Terminating extended unemployment benefits is a spending cut.  Interesting to see how it affects the economy.

Tue, 12/10/2013 - 20:26 | 4234314 starfcker
starfcker's picture

sale of assets. take this to it's logical conclusion. print (counterfeit) unlimited money, lend it to the banks at 0%. they lend it to the cities to pay salaries and pensions. cities can't pay it back. cities go bankrupt. hey, i know you can't pay us back, so we'll just take all the art (detroit) in that public museum!!! that park would make a dandy weekend house for the blankfein children. you owe us, remember. and if you want your nuts sucked, get paul ryan over here. he's the best nutsucker (next to marco rubio) on the whole red team. 

Tue, 12/10/2013 - 20:41 | 4234371 Xibalba
Xibalba's picture

hop, skip, and a jump away from selling your data to them.  

Tue, 12/10/2013 - 19:21 | 4234144 stocktivity
stocktivity's picture

Until the Fed stops printing, It's all Bullshit!!!

Tue, 12/10/2013 - 19:53 | 4234220 Xibalba
Xibalba's picture

Another 1.3 million people will not be able to pay thier rent just in time for Christmas and Bernake prints that shit in 3 weeks.  Sounds about right.

Tue, 12/10/2013 - 19:32 | 4234158 JonNadler
JonNadler's picture

they've been selling those "airwaves" for years, I remember back in the 90's they were doing that, how many freaking airwaves do they have?

Tue, 12/10/2013 - 19:38 | 4234174 Papasmurf
Papasmurf's picture

Plenty of spectrum was freed up by HDTV which uses less spectrum, leaving "white space".  Certainly, you don't think HDTV was about bringing you clearer reception for Dancing With the Stars and CNBC?

Tue, 12/10/2013 - 19:53 | 4234223 DoChenRollingBearing
DoChenRollingBearing's picture

@ JonNadler

No doubt they have been selling the gold too.


Oops!  Sorry to let that cat out of the bag.  Bad on me!

Tue, 12/10/2013 - 21:13 | 4234489 Blano
Blano's picture

It comes up all the time, and never (or almost never) happens.

Tue, 12/10/2013 - 19:48 | 4234201 Race Car Driver
Race Car Driver's picture

> I can't wait to see what other assets they are selling ...


If you're an American ... look in the mirror. You were sold downriver. So were your children - and their children's children yet unborn.

Who let this happen? Who are the dirty scumbags who gave our future away to a bunch of scumbag banksters?

Why, they're all dead and resting peacefully in their graves. The ones still living are having drinks and gormet meals - on you.


Tue, 12/10/2013 - 20:08 | 4234266 greatbeard
greatbeard's picture

>> Who let this happen?

So, what you you personally done to stop the madness, besides pointing the finger of blame?

Tue, 12/10/2013 - 21:01 | 4234430 Race Car Driver
Race Car Driver's picture

Are you serious?

I remember - vaguely - my first and only letter to my congresscritter. I don't remember what I wrote him about, but I do remember I got some form letter back a few weeks later that had nothing to do with my concerns. It was a feel-good diatribe with full intent to smile me off. It worked.

After that, I've had numerous run-in's with planning departments and various bureaucrats. All were painful because none involved me throwing my hard earned cash at them.

But nevermind me. The article is about the recent budget 'deal', foisted on us by Paul Ryan - some silver-spoon fuck who never worked a fuckin' day in his life. He went straight from university to congress - and has been there since. He's now over 40. Seemingly, he'll never work a day in his life, but will continue to shove whatever he likes up our collective asses.

So - fuck you for putting this shit on me. I didn't do it and can't afford to change it. And, no, it's not supposed to be this way. We are run by criminals, but the minute you act like them, you'll be tazed and thrown in a cell. So bitch is all I can do. That, and go Galt.


Tue, 12/10/2013 - 21:12 | 4234477 greatbeard
greatbeard's picture

>> fuck you for putting this shit on me.

You seem to have some serious problems with reading comprehension.  I didn't put this on you.  I responded to you putting this on other people.  Although just whom you were putting the blame on was vague, the intent was to clearly blame others.  Since you were so quick to judge others I thought you might step forward educate others on what they might do. 


Tue, 12/10/2013 - 21:12 | 4234484 Race Car Driver
Race Car Driver's picture

> You seem to have some serious problems with reading comprehension.

Lol ... GFY.

Tue, 12/10/2013 - 21:26 | 4234537 greatbeard
greatbeard's picture

>> GFY.


Tue, 12/10/2013 - 20:58 | 4234432 Blano
Blano's picture

IIRC selling the airwaves comes up almost every year, and never happens so I ain't holding my breath on that one.

Tue, 12/10/2013 - 19:38 | 4234171 aVileRat
aVileRat's picture

No gov shutdown. 80% of the pentagon projects were the common ground.

There goes the last black swan risking the taper. Time to see if markets are rational in the AM.

Today's Myth: If the market knows def. margins are secure in 2014/16 and taper is going to tighten retail lending then Arms/Aerospace should rally & home builders/yield products should price in 3.5B/month.

Someone get out Buster the MOMO dummy.


Tue, 12/10/2013 - 20:03 | 4234252 AngelEyes00
AngelEyes00's picture

"...enough for a largely symbolic cut of roughly $20 billion in the nation's $17 trillion debt."

All that ever happens when there is a bipartisan consensus are symbolic reductions.  When will it dawn on both parties that committments overwhelm revenue and the only way out of these badlands are drastic cuts on the order of hundreds of billions? 

Getting farther down the road with the same fiscal problems is no answer.  The headline should have read:

 'Both Parties Agree to Kick Can Down Road.'


Tue, 12/10/2013 - 19:09 | 4234101 takeaction
takeaction's picture

This ought a be good...what an absolute joke...this is all posturing so that on Jan 15th when we run out of printed money again...it doesn't have to be dealt with.  FUCK YOU FUCKERS!!  Vote them all out.


Tue, 12/10/2013 - 19:08 | 4234113 Cdad
Cdad's picture

So...quite possibly the only thing Average Joe could count as a victory in these last disasterous 12 months was...Sequester.

And all Paul Ryan could come up with, to avoid another govt shutdown, during which many government employees get twice paid for not working, was to cut into those sequestered funds.

Yeah...sounds like the crime wave continues...but this time with an effort by the Rs instead of the Ds.  [neither of which has one red cent to spend save for the tapping again of yet unborn generations]  



Tue, 12/10/2013 - 20:02 | 4234249 fockewulf190
fockewulf190's picture

This all comes to an end when the ten year blows through 3% on it´s way to double digits.  THATS when draconian measures are forced onto Congress and Hassan enters the room with his big assed tulwar and starts screaming "HASSAN CHOP!!".

Tue, 12/10/2013 - 21:08 | 4234468 Blano
Blano's picture

The crime wave continued even with the sequester, it just rearranged the deck chairs of the Titanic for a little while.

Tue, 12/10/2013 - 19:09 | 4234116 Everyman
Everyman's picture

How do 2 Senator's write a bill for a budget.  ALL funding bills must originate in the HOUSE!  ALL of these "represenatives" and "Senators" need to be tried for treason, or evicted from office.  and $60 Billion????  Considering we have OVER $17 TRILLION in debt?


Talk about nibbling at the edges of calamity!

Tue, 12/10/2013 - 19:57 | 4234230 Cdad
Cdad's picture

Paul Ryan is not a Senator...but not why I reply.

How?????  Simple.  Just continue to allow said treasonous politicians to fund their treasonous acts by...impairing the normal market function for the bonds [treasuries] on which they are dependent, by printing their currency into oblivion to create an artificial buyer of said treasuries, thereby turning off the alarm bells, also known as rates, so that the failed and treasonous politicians can continue on their merry way, destroying the nation at every turn, all while presenting themselves as the solution for the problems that plague the nation.  

The problem...as bad as it is with these losers that we have in D.C....is centered in...of course...the banks.  Mr. Yellen knows of what I speak, of course.



Tue, 12/10/2013 - 19:11 | 4234121 jal
jal's picture

Budgets are only guidelines to help guide the overspending.

Tue, 12/10/2013 - 19:55 | 4234228 Ham-bone
Ham-bone's picture

Mr. Jal,

well played, sir, well played.

Tue, 12/10/2013 - 19:14 | 4234124 nasa
nasa's picture

Security fee increase?  The Dynamic Duo can go fuck themselves. 

Tue, 12/10/2013 - 19:13 | 4234125 Surging Chaos
Surging Chaos's picture

Only in Washington is a spending "cut" just another way of saying "we're still going to spend MOAR, just not as fast as normal."

Tue, 12/10/2013 - 19:18 | 4234129 frankTHE COIN
frankTHE COIN's picture

Bullish ! And I got blown out of my little day trade, that I really wanted to hold onto to as a swing trade. And my massive Short position will be disappointed.

Tue, 12/10/2013 - 19:17 | 4234132 wackydog
wackydog's picture

They just took away the toy Obama wanted to play with to distract attention away from the implosion of Obamacare.

Waaaaa-waaaaaaa.... :too bad, so sad:

Tue, 12/10/2013 - 19:16 | 4234135 Gutenberg
Gutenberg's picture

So its a new tax on top of obamacare in 2014. Sounds good for joe six pack. Increased airfare security fees. But if i fly my private or corporate jet it doesn't matter. If I am a crook hedge fund or tbtf, i don't have a pension, doesn't affect them also. Wow, this is great. Truly a government by and for the people.

Wed, 12/11/2013 - 00:20 | 4235028 Greenskeeper_Carl
Greenskeeper_Carl's picture

Ya what a crock of shit. An extra 5 dollars each time you fly. You are now paying extra to have some wanna be Gestapo asshole feel you up in an airport, or molest your children. You gotta be fucking kidding me.

Tue, 12/10/2013 - 19:17 | 4234136 imapopulistnow
imapopulistnow's picture

It is a return to the incremental approach of democratic governance.  About damned time.

Tue, 12/10/2013 - 19:26 | 4234151 Yen Cross
Yen Cross's picture

   Great, I get to pay the TSA even more for my "anal probings" when I travel.

Tue, 12/10/2013 - 19:37 | 4234168 Edge.case
Edge.case's picture

Ah, man. That was gonna be my Xmas present this year. The shutdown that is.

Wed, 12/11/2013 - 00:23 | 4235032 Greenskeeper_Carl
Greenskeeper_Carl's picture

Ya mine too. I was gonna buy more shiny for myself since of course it's perfectly logical that when the govt shuts down and our currency and debt are called into question(quite correctly, shit down or not), gold and silver drop, which in the new normal is of course perfectly logical

Tue, 12/10/2013 - 19:36 | 4234169 Seeking Aphids
Seeking Aphids's picture

So we now have confirmation of where priorities are: for the R's it is not to cut defense spending, for the D's it is not to cut social spending...but in both cases it is not to cut and to defend vested interests. In the meantime the house is burning down around them....both parties continue to show that vested interests count more to them than dealing with pesky reality. Can treasury rates remain low given this approach....surely bond buyers are taking note and deciding that this ship is sinking.......for those who think this will hasten QE I would respond that it does the opposite - it forces the Fed to continue buying as the buyer of last resort and to try to keep rates low.....good luck with that! We should be at 3% by Christmas if the bond vigilantes aren't asleep or on vacation..........I was of the opinion that the Fed would make a symbolic taper in Dec. but am now not so sure....they won't be able to if rates head up.............

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