The government is open, what happens next?

The government is open, Panda cam is back and a committee is looking at the budget. What could possibly go wrong?

The-governmentThe shutdown is over. The government is open. Does this mean everything is back to normal?

That depends on your definition of normal. Yes, the government is open. Federal employees are back at work. And Congress has kicked the can just a little bit further down the road.

And Thanksgivukkah has been saved?

Yes. Remember when Republicans originally proposed postponing the default by six weeks?

I do seem to recall that.

Well, they were basically asking for more time to hash out a deal without risking the US defaulting on its debt. The deal reached earlier this week provides Congress with that extra time, time that would theoretically allow the Congress to stop “governing by crisis”, as President Obama puts it.

The deal that ended the government shutdown and lifted the debt ceiling came with few conditions, though. The first condition is that Congress get together a conference committee to come up with a budget deal, including tax and spending policies, by 13 December.

That’s great. Committees are so effective. Hold on a second, wasn’t there a committee of some sort back in the day?

Yes – you’re thinking of the 2011 supercommittee.

If I remember correctly, that attempt at bipartisanship didn’t go all that well …

Right. About three months after its August 2011 launch, the supercommittee failed to come to an agreement. And while some of the 12-member panel still shudder at the memory, four of them – Paul Ryan, Patty Murray, James Clyburn and Rob Portman – got the band back together, with 25 other lawmakers from both parties and both houses. The new committee also includes some conservatives – nine of its members voted against the deal that re-opened the government. These nine will probably try to ensure that the budget contains some things that the Republicans have been fighting for, like cuts in farm subsidies, federal pensions and unemployment insurance.

This is not sounding good at all. If the supercommittee wasn’t able to reach a deal in three months, why would we think that this new, allegedly improved committee can come up with a deal in less than two months?

They probably can’t. First, no one expects any “grand bargain” or a long-term budget to come out of the committee. Second, the deadline is 13 December, about a month before the temporary funding to keep the government open expires, on 15 January. So there will still be some time to come up with an alternate solutions.

Goldman Sachs analyst Alec Phillips says that neither party has high hopes for an agreement that would bridge the differences between the budget resolutions passed by the Republican-led House and the Democratic-led Senate.

Then why have a conference committee at all?

Because there is one more deadline that falls on 15 January. The next round of sequestration cuts will take effect automatically, unless the committee is able to strike a deal.

Wait, wait, wait. We are back to another sequester?

Well, yes. The sequester is a part of the Budget Control Act (BCA), which passed in August 2011 in yet another last-minute deal that helped avoid a default on US debt. The BCA sets a cap on spending for every year from 2012 to 2021, in order to create about $1tn in deficit reduction in over those 10 years.

And what does the committee have to do the sequester?

See, while many may have doubts over whether the committee will be able to reach a deal on the budget, there is hope that the committee might be able to reach an agreement that would help reach some minor compromises that will help blunt the second round of sequester cuts. According to Kevin Logan, chief US Economist at HSBC securities, that would take future spending reductions or revenue gains somewhere else in the longer-term budget projections.

Since Congress has been able to create such future savings in the past, they’ll probably be able to do it again. Logan says that instead of one big compromise, there might be a series of them that will set the overall level of spending “somewhere between the $1,058bn that the Democrats desire and the $967bn target that the Republicans are aiming for”.

So there won’t be another shutdown in January?

Most analysts find it unlikely. The shutdown did not quite go the way Republicans wanted and while its full impact is yet to be seen, it has definitely not helped the US move closer to economic recovery.

US economic confidence dropped by 17 points in the first two weeks of the shutdown. Even before the shutdown, US consumers self-reported that they have been cutting their daily spending from $95 in August to $84 in September – IHS chief economist Nariman Behravesh and IHS Global Insight economist Sara Johnson don’t really expect it to get better. They marked down their forecast of the US economic growth in the upcoming months from 2.2% to 1.6%. According to them, some spending, such as buying computers and cars, is being deferred and should show up later in the early 2014 and other spending, such as consumer eating out, has been lost completely.

OK – what about the debt ceiling?

Right – one of the other conditions of the deal struck earlier this week is that it only extends the debt ceiling until February. However, as Phillips notes, a precedent has been set – since the 2012 election, the debt limit has been increased twice and each time Republicans have failed to attach substantial policy provisions to the increases. While some, like Senator Ted Cruz, might attempt to extract concessions next time round, it is unlikely they will succeed.

The markets have also caught on to this precedent, realizing that Congress isn’t likely to let the US default. They have started to tune out the fiscal drama in the US politics.

That’s a good thing, no?

In a way. It’s good because that way, the political theatrics of our current Congress have less of an effect on our economy. However, it also makes it more acceptable for this political game of chicken to take place again and again. Even if Congress takes this opportunity to not “govern by crisis”, their inability to come up with long-term solutions is setting another precedent – that of multiple continuing resolutions that barely act as Band-Aids and of semi-annual fiscal drama.

Good times!

Exactly.

Source | TheGuardian

Find us here

Get news from the CSGLOBE in your inbox each weekday morning

The views and opinions expressed in this article are those of the authors/source and do not necessarily reflect the position of CSGLOBE or its staff.

Paid content

Don’t Listen to Fox. Here’s What’s Really Going On in Seattle’s Protest Zone.

It seems I live in a city undergoing a “totalitarian takeover” that will lead to “fascist outcomes”...

Leaked CDC document contradicts Pence claim that U.S. coronavirus cases ‘have stabilized’

Even as Vice President Mike Pence wrote in a Wall Street Journal op-ed published Tuesday that coronavirus...

Georgia House Votes To Allow Citizens To Abolish Police Departments In The State

The Georgia House backed an effort on Friday to dissolve the Glynn County Police Department and any...

What's New Today

Georgia House Votes To Allow Citizens To Abolish Police Departments In The State

The Georgia House backed an effort on Friday to dissolve the Glynn County Police Department and any...

Leaked CDC document contradicts Pence claim that U.S. coronavirus cases ‘have stabilized’

Even as Vice President Mike Pence wrote in a Wall Street Journal op-ed published Tuesday that coronavirus...

Five bombshells about Trump from Bolton ‘s book

Excerpts from former national security adviser John Bolton ’s book about his time in the Trump administration...

Don’t Listen to Fox. Here’s What’s Really Going On in Seattle’s Protest Zone.

It seems I live in a city undergoing a “totalitarian takeover” that will lead to “fascist outcomes”...

MOST READ

What Is Agenda 21? Depopulation of 95% of the World By 2030

Most people are unaware that one of the greatest threats to their freedom may be a United Nations program which plans to depopulate 95%...

Complete List of BANKS Owned/Controlled by the Rothschild Family

What’s the significance of having a central bank within a country and why should you concern yourself, your family and colleagues? Central banks are illegally...

Racial wounds rip open under a president with a history of exploiting them

President Donald Trump has spent much of his adult life building his brand around racial divisions.

Don’t Listen to Fox. Here’s What’s Really Going On in Seattle’s Protest Zone.

It seems I live in a city undergoing a “totalitarian takeover” that will lead to “fascist outcomes”...

NSA Contractor Accused of Stealing Data Far More Sensitive Than the Snowden Docs

According to an indictment released Wednesday, the information stolen by Harold Martin, a former NSA contractor who was arrested in August of last year,...

McDonald’s race row as store boss is heard telling zero hours worker she can’t get any extra work because she is BLACK

McDonald’s has found itself at the center of a race row after an assistant manager told an employee she wouldn’t get any extra shifts...

The Indian Government Just Eliminated 80% of the Country’s Cash

The Indian government took unprecedented action last week when it eliminated 500 and 1,000 rupee paper notes from its financial system. The change occurred...

Scientists Discover 145 Alien Genes In DNA, We Are Not 100% Human

Mystery of our 145 'alien' genes: Scientists discover some DNA is NOT from our ancestors - and say it could change how we think...

The Soros reign: a Romanian example

Romania is one of the European countries which is most oriented towards the Atlanticist geopolitical project. Despite its Orthodox Christian people, its elites always follow...

Death penalty for drug traffickers part of Trump opioid plan

President Donald Trump’s plan to combat opioid drug addiction nationwide calls for stiffer penalties for drug traffickers, including the death penalty where appropriate under...

8 Quotes From a Sioux Indian Chief That Will Make You Question Everything About Our Society

Luther Standing Bear was an Oglala Lakota Sioux Chief who, among a few rare others such as Charles Eastman, Black Elk and Gertrude Bonnin occupied the rift between the...