Former CBO Director: The Fall Will Be "Very Scary", Expect A Market Crash

Rudy Penner, the former director of the Congressional Budget Office and the person described by MarketNews international as "one of Washington's most respected fiscal policy experts", told MNI Wednesday in an exclusive interview that he expects a "very scary" fall 2017 due to fiscal issues, with market-disrupting battles ahead on both the debt ceiling and fiscal year 2018 spending. Penner directed the CBO under president Reagan, worked at high level posts in the White House budget office, and the Council of Economic Advisers. He is currently a fellow at the Urban Institute and sits on the board of the Committee for a Responsible Federal Budget.

"There are so many politically hard issues and so little consensus on budget and tax policy. I assume we'll somehow get through this, but not without getting frightened on a regular basis," Penner said.

"Probably the best we can hope for is muddling through the (FY 2018) budget and the debt limit and getting very limited health, tax, and infrastructure legislation. There is not going to be significant stimulus coming out of Washington in the foreseeable future," he said, echoing what many other pundits have said before. Penner said a "bipartisan negotiation is badly needed" to forge even a limited FY 2018 spending agreement. But he's not certain this will occur.

"Even a very limited spending agreement might be an impossible dream. We may just stumble into a series of short-term CRs," he said, referring to temporary spending bills to keep the government funded.

While the "record polarization" rhetoric is familiar, the clock is starting to tick ever louder: the 2018 fiscal year begins on October 1, 2017 and extends until September 30, 2018. None of the 12 annual spending bills for FY 2018 have yet been approved by Congress.

On to the debt ceiling, the one item on the calendar which Morgan Stanley (and others) have said will be the biggest hurdle for the market in the next two months.

Penner said he believes it will be "very challenging" for Congress to pass legislation this fall to increase the statutory debt ceiling. Treasury Secretary Steve Mnuchin has asked Congress to lift the debt ceiling by the end of September. Penner countered that a "plausible path" for dealing with the debt ceiling is to pass legislation in September to suspend the debt ceiling until after the November 2018 mid-term elections.

However, such legislation, he said, may have to be negotiated by an unusual coalition assembled by House Speaker Paul Ryan, a Republican, and House Minority Leader Nancy Pelosi, a Democrat. Said such an agreement, Penner said, "could put Speaker Ryan's job in peril" by conservative Republicans who oppose it. He said he believes the debt ceiling is "an incredibly stupid law that makes no logical sense."

"It terrifies the world and frightens markets every few years--but does nothing to actually control spending or cut budget deficits," he said.

Penner said he sees little Republican consensus on tax reform and expects any package that emerges to include "some quite modest tax cuts" and the closure of loopholes.

Finally, Penner touched upon the market, and said that like virtually everyone else, he remains "totally  puzzled" by the surging stock market, arguing that markets soar even as it becomes more evident that major fiscal stimulus will not be coming out of Washington this year.

"The markets don't seem to have absorbed the reality of Washington yet," he said. "I have an uneasy feeling this will all end badly--that there will be a very major market correction."


Blano Wed, 08/09/2017 - 17:53 Permalink

Dear ZH:Your pop up ads on my phone have become insufferable. I don't need to read you THAT badly to put up with it. Dial it back a little please. 

83_vf_1100_c Blano Wed, 08/09/2017 - 23:03 Permalink

Firefox browser and uBlock add on is what I use. Dead simple to install. What ads? It works well on nearly everywhere on the web I frequent. A few sites have started blocking me because they detected an ad blocker. They ask to disable the adblocker before entry is allowed.  I quit visiting those sites.

In reply to by Blano

buttmint Wed, 08/09/2017 - 17:56 Permalink in azzholes like Obama and his TRanny Chewie to show all how its done!After all, these faggots racked up the national debt from $10 trillion to 19 T.It is called "being a Negro."

earleflorida buttmint Wed, 08/09/2017 - 18:19 Permalink

BUSH GAVE OBAMA THE MARKET CRASH!cheney gave us 'deficits don't matter'!bush $43 gave us iraq!!! ... and China into WTO with favored nation status 12/11/01 (90 days of mourning)clinton gave us '911'... no moar 'Glass-Steagall' and a whopper of NAFTAAFGAHNISTAN was all that was responsible for harboring alQaeda! *(PERHAPS pakistan to a lesser extent regarding geographic 'whack-a-mole'?)today the deficit would be ~ less than $10 Trillion, if not for these presidents (obama doesn't get a free ride, being he perhaps would have started shit elsewhere, like in NK--- but he did tell netanyahu to fuck off!)

In reply to by buttmint

earleflorida detached.amusement Wed, 08/09/2017 - 19:08 Permalink

lincoln being a corporate lawyer and extremely pragmatic (and historian) was well aware of the British assault on america 1n 1812-15 (1812 War), and the 'civil war [1961-65]' being fresh in america's history 45 years hence was a proxy war fought by the south for great britain.great britain fucked wilson and america bigtyme in WWI, as they tried their best in WWII with FDR!in fact Britain gave the ussa the 'Zionist Palestine'...there's moar, but 'FUCK the slimie`lime`EEEEs!!!

In reply to by detached.amusement

caesium earleflorida Thu, 08/10/2017 - 04:39 Permalink

Why all the down votes? As conspiracy theories go, I have read alot worse on here. (Typo that should read *1861-65?). Certainly FDR in 1941 was better prepared than Wilson in 1917. The rest of your stuff is worthy of respect (to quote Don Corleone).Now is the time however, for the USA to break up. Only the military could manage such a development so it might get messy.

In reply to by earleflorida

izzee Wed, 08/09/2017 - 17:58 Permalink

Yeh this FORMER GUY from the group that SEZ it can PreDICKT 10 Years into the /Future.They SAW 2007-2008.They SAW 2009- 2017....How Much money...  SnP 666 to 2480.  

DirtySanchez (not verified) Wed, 08/09/2017 - 18:01 Permalink

Former CBO is a piece of shit political hack who should have his head busted up with the fists of furious citizens.

order66 Wed, 08/09/2017 - 18:30 Permalink

"the debt ceiling is "an incredibly stupid law that makes no logical sense."Overspending and jacking up the national debt to over 100% of GDP makes perfect logical sense though.Fucking morons.

pizdowitz Wed, 08/09/2017 - 18:31 Permalink

Why is it that the retirees are always doom-and-gloom jack-assess?Retired CBO... retired Green Beret, retired MKUltra.... All wrapped in their Depends, divorced from reality...How about some re-tired 16 wheeler on a beer run from Texarkana?Enjoy life. You ai'nt coming back here, no matter what, you hear?

Librarian Wed, 08/09/2017 - 19:08 Permalink

So go long in the Fall.I'd prefer to get my investment advice from Jim Cramer, but I'm always on the lookout for a good substitute play.Has ishares come out with the Cramer triple inverse fund yet?

Storm-Clouds Wed, 08/09/2017 - 19:33 Permalink

Say it again....


We don't need no stinking debt-ceiling!

We got nukes!

We killing strangers! Cause we don't want to kill the ones pulling the strings....

JailBanksters Wed, 08/09/2017 - 19:47 Permalink

I've been expecting a crash every year since 2010 !, and every year it keeps rolling over into a bigger crash.And here we have Bullwinkle saying, "This time for sure !", if not then 2018 

Racer Wed, 08/09/2017 - 20:28 Permalink

As long as banksters have access to free money why should there not be a "permanently high plateau"They will do 'what ever it takes' to con and scheme and steal

Vlad the Inhaler Wed, 08/09/2017 - 22:10 Permalink

That's funny, another former budget director name of David Stockman said the same thing this past spring, and it was just another big nothingburger, in fact the market is way up since then as per usual.