"Both Sides Are Dug In": Why This Government Shutdown Could Last A Long Time

Today for only the 19th time in history, the US government has found itself in a "funding gap", a technical term for shut down. One of the reasons why this event is not being taken too seriously by the financial punditry, markets or much of the media, is that looking back not only have most government shutdowns been brief affairs, lasting less than 10 days - with the occasional outliers, such as the 21-day closure in 1995 and the 16-day halt in September 2013 - they have had little to no impact on either the market or the economy.

asd

And yet, as Goldman writes, after the two political parties breached the shutdown Rubicon, there is a distinct possibility that this time the shutdown lasts "a few weeks" if not longer. The reason is one of both optics and motives: according to Goldman's political economist Alec Phillips, "both sides appear to think they could gain from a [lengthy] shutdown."  He explains:

Democratic leaders appear to believe that a shutdown would highlight the DACA immigration issue, which a large share of the public, including a majority of voters who supported President Trump in 2016, generally support according to most public opinion polling (87% of the public and 79% of Republicans according to a CBS News poll released January 18).

Meanwhile "Republican leaders appear to believe that Democrats, who are in a good political position going into the midterm election according to generic ballot polling and other metrics, would suffer from a shutdown."

In other words, "If both sides believe the other side will be blamed, neither has the incentive to avoid a shutdown."

Making matters worse, there is nothing in the immediate future that will make conflict resolution an urgency: traditionally a drop in the market would serve as an incentive for political parties to reach a compromise, although as we have extensively discussed in the past year, risk assets no longer respond to political events or narrative. This means that without the market intervening as an "arbiter" - i.e., underoging a sharp correction -  the two sides are likely to dig in and avoid any tangible negotiations, let alone a compromise.

As a result, while a bitter episode of fingerpointing has erupted, with both sides trying to make the other look like the villain, the US now faces the threat of a protracted shutdown with no end in sight.

* * *

In practical terms, events from the first day of the shutdown seem to confirm this scenario. As The Hill reports, Republican and Democratic leaders on Capitol Hill lashed out at each other on Day One of the government shutdown Saturday, trading barbs and casting blame "as a resolution to the funding impasse appeared nowhere in sight."

The rhetoric took a harsh turn, with Democrats complaining that President Trump is an erratic, unreliable negotiating partner and Republicans bemoaning Democrats’ intransigence over what the GOP sees as unreasonable immigration demands.

“Both sides are dug in. … I wouldn’t be surprised if we’re here tomorrow,” Rep. Bill Pascrell (D-N.J.) told The Hill after huddling with fellow House Democrats in the basement of the Capitol.

And, if Goldman is right, he shouldn't be surprised if he is still there in several weeks time.

There is of course, hope for a breakthrough: both chambers are in session Saturday –– a rare weekend workday when many lawmakers were griping about risking vacation plans and overseas trips. But it appears to be largely a day dedicated to theatrics and PR management: no votes are scheduled to reopen the government as the sides continue to air their grievances in press conferences and on cable news shows.

Meanwhile, with neither Republicans nor Democrats willing to budge, congressional leaders let the insults fly on Capitol Hill and it increasingly looked like the shutdown would run into the  work week, furloughing hundreds of thousands of workers.

Senate Minority Leader Charles Schumer (D-N.Y.) told reporters trying to work out a deal with Trump was like “negotiating with Jell-O,” while House Minority Leader Nancy Pelosi (D-Calif.) used a floor speech to decry Trump’s “all-around incompetence” and “inefficiency.”

On the other side, Speaker Paul Ryan (R-Wis.) placed blame for solely at the feet of Senate Democrats: “One party in one house of this Congress is deliberately holding this government hostage.”

Trump also got involved in the spat using his favorite medium: “Democrats are holding our Military hostage over their desire to have unchecked illegal immigration. Can’t let that happen!” Trump tweeted.

 

But the most direct confirmation that nothing will change for a while came from Rep. Gerry Connolly (D-Va.) who after the House Democratic Caucus meeting said that he’s increasingly “pessimistic about reopening the government in any kind of expeditious way."

The reason?  "Largely because of the intransigence of Republican leadership," he said even though it was the Democrats votes that led to the shutdown. 

* * *

Meanwhie, and as further indication that the shutdown will last, neither party appeared to even agree on what should be the first step to ending the government shutdown. Republicans insist that the government should reopen before they would resume negotiations on immigration, a non-starter for democrats.

House Majority Leader Kevin McCarthy (R-Calif.), who has been in talks with Sen. Dick Durbin (D-Ill.) and House Minority Whip Steny Hoyer (D-Md.), said “we’ll go back to the table when the government’s back open." GOP leaders, particularly Ryan, have been adamantly opposed to attaching any DACA provision to a spending bill, saying it’s an independent issue that should be addressed separately.

Members of both parties have been in talks about shielding young undocumented immigrants from deportation in exchange for enhanced border security. The Trump administration first made plans to rescind the Obama-era Deferred Action for Childhood Arrivals (DACA) program last year, which granted temporary work permits for qualifying immigrants brought the U.S. illegally as children.

"We have been, and we continue to be, willing to work together in good faith on immigration,” Ryan said Saturday on the House floor.

Pelosi, meanwhile, insisted that lawmakers need to agree on parity between defense and nondefense spending, disaster relief, a path for DACA and other priorities before supporting another stopgap measure, or continuing resolution (CR).

“It’s no use having another CR unless we have the terms of engagement of how we go forward on the … parity, on the pay-fors, on the pensions, on the DACA and on the border security,” Pelosi said at a press conference in the Capitol. Many House Democrats are hinging their support for a CR on stronger assurances that DACA protections become law.

“Let’s say they give them a vote in the Senate. It doesn’t solve the impasse if Republicans in the House [don’t follow suit],” Rep. Luis Gutiérrez (D-Ill.) said Saturday. “This is going to take Speaker Ryan to say, ‘I will give them a vote.’ ”

In a word: chaos. And what's worse, now that the natural offset to any government shutdown no longer works, namely a market crash which tends to push both sides to the negotiating table quickly and efficiently, it is unclear what if anything with lead to a resolution from the current standoff.

Unless, of course, there is a market crash.

Going back to the Goldman analysis, the bank was sanguine on market risks, at least in the near-run. However, in case the shutdown drags on for weeks, it will get very messy. Here's why:

The main risk around the funding deadline is that it could eventually interact with the debt limit, which will need to be raised in March, we estimate. By resolving the DACA issue in the near term, this would reduce the risk that the issue comes back into play around the much more important debt limit deadline. Unlike government shutdowns, which financial markets tend to shrug off, markets could have a stronger negative reaction if the upcoming debt limit increase became entangled in the current set of issues.

In other words, should the government shutdown persist, eventually stretching into late February or even early March when the debt ceiling fiasco will also be on deck, then stocks just may do something they have not experienced in years - a drop of more than, gasp, 5%...

 

Comments

knukles Sat, 01/20/2018 - 16:41 Permalink

Close it down for a long long time, so that the Progressive cries of "Children will starve" will be shown to be as much rubbish as the Fusion dossier and Democratic integrity

Sudden Debt BennyBoy Sat, 01/20/2018 - 17:41 Permalink

They fund themselves by improting the drugs for the sheep so they're okay.

National parks and all... that also fund themselves but that punish tourist are the perfect thing to shut down.

you see! America is playing hardball...

 

In reply to by BennyBoy

thebigunit BlackChicken Sat, 01/20/2018 - 17:28 Permalink

The whole point of the Schumer Shutdown is to distract the MSM from talking about "the memo".

The "shutdown" is about starving children while "the memo" is just about "partisan politics" which "everyone hates".

Schumer will try to get the shutdown to go on for as long as possible until he can switch the narrative to the next progressive shiny object.

 

 

In reply to by BlackChicken

NumbersUsa MK ULTRA Alpha Sat, 01/20/2018 - 20:48 Permalink

Its the jew supremacists as always who are orchestrating the invasion of America. jew jacob javits gave us the 1965 immigration act that started all this mess. He victoriously screamed at the top of his shrill jew voice "open the flood gates" when he and all his jew supremacists cronies in our government, media, finances, & jew supremacist organizations such as Aipac, adl, aclu was finally able to shove it down Americas throat.

The jew supremacists are the one and only true Enemy of this Republic, oh wait the jews call it a democracy-.

The only way to reclaim your republic is to purge the jew supremacists from the system.   

In reply to by MK ULTRA Alpha

MK ULTRA Alpha NumbersUsa Sat, 01/20/2018 - 22:24 Permalink

Many of the American communist, the extreme far left are against Israel. They believe by revolution they can over turn the Jewish Christian Zionist power structure which has created and funded Israel.

What's insane is, the Communist movement in America is led by Jews. It's because Jews are inbred and the way they think is inverted. They use an inverted logic, that is their reality, the opposite of human logic and reality.

The Jewish enemy is the humans. That's why they joined forces with racist people of color and call for the genocide of white America. Thus, instigation and organizing the civil war, the Jewish communist by trickery in the end, will take over the revolution and those who question and do not obey in the Jewish genocide army of hate for whites will be killed.

They did the same thing in Russian 1917 revolution killing over 20 million white middle class Christians. The Jews incited the Russian serfs to kill off the white middle class. 

Now in America, racist people of color, foreigners and former black slaves are being stoked by the Jewish communist leaders.

One input correlates to the similarity to the Russian 1917 genocide of white middle class Christians is the influx of Russian Jews to the USA after the fall of the Soviet Union. Hard core communist settling in the USA have been working for a communist take down of the USA. Even on university campuses, American youth is being turned into an army of destruction against their own nation, their values and culture.

Most all Jews in America are from Eastern Europe, not Germany, these are the Khazars. What they do here, especially with the arrival(1990's) of the new Russian Jewish communist army, is the same as they have done over and over through the last 800 years, since the decline of the Khazarian empire.

We're set up to be slaughtered and that is their purpose and the reason? it's because they're inbred, remember the smaller the tribe the greater the inbreeding. And if you're not brainwashed jumping up and down for Ju Ju and Israel, then you're to be silenced by nationwide censorship, and if that doesn't shut you down, then the police state control grid, they set  up to control us, placing us in martial law lite, well then you can be captured in the Jew mental health dragnet. 17% of the American people are convinced they're crazy, are taking Jew mind dope which causes brain tissue loss. That's over 50 million Americans being reduced to Zombies and the numbers are growing. When I was a kid, Jews went all over the country giving lobotomies. Now it's chemical lobotomies. And over a million babies are on Jew mind dope which is creating armies of obedient Zombies. Drop the IQ 20-30 points and always believe one must be under state control.

Jews have destroyed America. They're working feverishly to have a race war because too many Americans are abandoning the Christian interpretation of the people in this country who call themselves Jews. The Jews must use the media and instigators to point the finger so the finger will not be pointed at them. All evidence of what the Jews are doing to America is always covered up and a distraction is always launched to force a cover up.

 

In reply to by NumbersUsa

mkkby Baron von Bud Sat, 01/20/2018 - 22:01 Permalink

Trump could end this with a win in 2 seconds.  Start deporting the DACA shits and order the army to patrol the border.  2000 miles at 10 soldiers per mile = 20,000 troops to stop illegal immigration entirely.   Much better than a wall.

Tell the dems they better agree to his immigration terms fast before every last DACA shit is gone.

In reply to by Baron von Bud

Joe Mama 3 Troglodyte Erudite Sat, 01/20/2018 - 20:02 Permalink

Perspective is a muther fucker !!!!!!!     In the Houston area we have PLENTY of "disabled"  people with Trump stickers, MAGA and all walks of trailer park republican shit on the back glass of their 60K dollar trucks..................on on the newest shiniest and highest paying welfare ever to be bestowed on an individual.........

VA Disability !!!!!!!!!!!!!!!!!!!!!!!!!!

In reply to by Troglodyte Erudite

eatthebanksters Troglodyte Erudite Sat, 01/20/2018 - 21:34 Permalink

The libturds know if they accede to Trump's deal then its the end of the world as they know it.  They are going to risk EVERYTHING because they would rather lose it all by holding out than by giving in.  The problem is that by holding out they might eventually take the rest of us with them.  If they fuck over the economy and cause a default in our bonds, then its going to be libturd hunting season with no daily limits.

In reply to by Troglodyte Erudite

political junkie Gaius Frakkin'… Sat, 01/20/2018 - 21:15 Permalink

Exactly!!! Tyler - get real, that poll is sooooo off. Do you really believe Americans think a 800,000 + illegals should come before American children and the military, etc... 

 

Democrats have no base without illegals... that's ALL they've got. That is what they are putting before the American peoplel... the Democrat Party...

 

Dems, esp. the wackos who think after a year of great governing by Trump still think that crooked HRC should have won... are not critical thinkers.

In reply to by Gaius Frakkin'…

Lumberjack chunga Sat, 01/20/2018 - 17:48 Permalink

Turkey is bombing an airbase in Syria that ‘someone’ has been using to supply ISIS. Russia voiced concern about that particular base and China ain’t too happy about certain moves underway in China (near the Sino/Russian border) Paki Africa and India.

Shit gets real soon unless deep state gets reigned in pronto. Expect major false flags soon.

Prep accordingly. The assholes have lavish bunkers, we don’t....

P.S. Brit Bob prolly ain’t too happy about China doin bidness in Argentina either....

In reply to by chunga

Twee Surgeon Croesus Sat, 01/20/2018 - 19:31 Permalink

I'm a dual citizen, Crocus, born to British parents who were in the USA for a decade or more before I was born and they decided to move back to where they came from because they thought it would be a better place to raise kids. There are numerous Dual Nationals around you and in the Public eye,and Millions of WWII War Brides that account for the Birthing of Millions of natural born US Citizens. Billy Idol and Mel Gibson are dual nationals. Both born in NY to parents that Applied to enter the USA and entered legally, stood in the lines and filled out the form's, paid all required fee's and had Sponsors so they wouldn't be sucking off the .Gov tit. Done honestly in broad daylight, back in the day.

An Oz like Mel Gibson or a PseudoCockney Entertainer like the Great Billy Idol are pretty much going to make an honest choice before they berth up in the USA, Having been raised abroad doesn't mean they have no affinity for their fated or destined place of birth and I bet both of those dickheads would be on the beach next to you if the invading Commie landingcraft started rolling up on the beaches of California. In fact they would rejoice in such an opportunity, I'm sure. You just know Jack-Shit about much outside of your garden gate, I suspect.

https://www.uscitizenship.info/blog/celebrities-with-dual-citizenship/

I won't bother doing all the research for you, Crocus, but I can assure you that every Dual National doesn't automatically become a Millionaire or Rock-star. Thousand of them are working at Wal-Mart or digging fucking ditches for Sprinkler systems along side Mexican wet back immigrants for the very same pay but with the disadvantage of having to pay State and Federal Taxes on their legit Paycheck and end up being the bottom rung of society because they are considered 'Lifelong Citizens' Born in Downtown city, USA.....US Citizen that just got off the Banana Boat, none-Immigrant Immigrant that might not even speak English as you know it.

Falling through the cracks is the condition of most Dual nationals. I know you're talking about other things, but do not throw all us Cunts in one bag. https://www.youtube.com/watch?v=9OFpfTd0EIs

 

 

In reply to by Croesus

Chupacabra-322 Ex-Oligarch Sat, 01/20/2018 - 16:58 Permalink

@ Ex,

 

The Criminal FISA & NSA Deep State is the Foundation of the entire Tyrannical Lawless Surveillance State.  Donald Trump has two choices.

 

Stay silent & admit its OK to Surveillance of a Presidental Candidate or not. 

 

Stay silent & admit the absolute, Complete, open in your Faces

 

Tyrannical Lawlessness.

 

President will be Set as it was when the Pure Evil War Criminal Treasonous Seditious Psychopaths gave retroactive immunity to the Criminal Telecommunication (“Intelligence”) Companies which are part of the foundation & Insfrasturcture of 

 

Tyrannical Lawlessness.

In reply to by Ex-Oligarch