6 days to a shutdown, and all is quiet
More activity may erupt in the next few days, however, if Congress and the Obama administration want to avoid closing the federal government next week.
Answer: A little. But not much. The odds of a shutdown are high, but there's plenty of time. Greg Valliere of the Potomac Research Group thinks a deal will be cut on Monday night. It will be a bill that no one will like.
And that may help explain why the stock market ended mostly lower on Tuesday. The Dow Jones industrials ($INDU) fell 67 points to 15,335, a fourth straight loss. The Standard & Poor's 500 Index ($INX) dropped 4 points to 1,697, also a fourth straight loss and the first under 1,700 since Sept. 16. The Nasdaq Composite Index ($COMPX) added 3 points to 3,768.
Much of Tuesday's declines were ascribed to the uncertainty created last week by the Federal Reserve. Most traders had expected the Fed to start to trim (or taper) its $85-billion-a-month bond-buying program and were shocked when the Fed didn't.
The worry over when the Fed will taper and its effect on the economy may intensify the volatility in the stock market over the next few weeks.
Investors still appear to believe that a budget deal will be cut. You can see that in the fact that the Dow is still up 17% on the year, with the S&P 500 up 19% and the Nasdaq up 24.8%. But there is some unease creeping in. The S&P 500's close below 1,700 should be watched carefully because 1,700 has acted as a strong support for the index.
And even if the government shuts down, the move won't last long. But that optimism could be put into play the longer there is no deal.
There's been a little trading. Senate Republicans are willing to vote on what's been called a "clean" spending bill. That strips out the requirement that the Affordable Care Act be defunded -- the most important piece of a spending bill passed last week.
That idea is likely to be opposed by Sen. Ted Cruz, R-Texas, who has been pushing to defund Obamacare at any cost. And what happens in the Republican-controlled House of Representatives is anyone's guess.
Sen. Harry Reid, D-Nev., the Senate majority leader, has signaled that he would consider a bill that sets federal spending at an annual rate of $968.3 billion. Liberals want a $1.058 trillion rate, which is 9.3% larger.
Even if a bill is passed and President Obama signs it, the government may be able to operate only for a few weeks. Or earlier because the big debt-ceiling fight is ahead. The Treasury is running out of cash to pay the government's bills.
If a shutdown occurs, about half the government will continue to operate, including the armed forces, air-traffic controllers and the like. Agencies that are self-supporting, such as the Federal Reserve or (and we're serious here) the U.S. Postal Service, would remain open.
But national parks would likely close. So would processing of passport applications. It might affect jobs for government contractors like Lockheed Martin (LMT) and General Dynamics (GD).
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And every productive member of society will be better off.
And risk a credit rating downgrade? Nope.
I'm expecting some more can kicking down the road.
I would rather prefer a government shutdown.
Obviously, the economy and thus tax revenue isn't coming back anytime soon, therefore cutting government expenditures is the only wise option.
In the early U.S., taxes were levied principally on consumption. , one of the two chief authors of the anonymous, favored consumption taxes in part because they are harder to raise to "" levels than incomes taxes. In the (), Hamilton wrote:
It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without defeating the end proposed—that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty that, "in political arithmetic, two and two do not always make four." If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
Although personal and corporate income taxes provide the bulk of revenue to the federal government, consumption taxes continue to be a primary source of income for state and local governments. One of the first detailed proposals of a personal consumption tax was developed in 1974 by William Andrews.
Chaos is the new norm. Fear is the weapon of choice to pull off the reduction in social spending and initiating Obamacare. A perfect diversion about anything that is actually substantive to improving our lot. Still so many folks think there is a difference between these two groups. This acting in concert to confuse citizens still seems to work so they go ahead on. Poor people struggle even more while the rich and their political cronies get even more comfortable. Lets talk about these cats exempting themselves from Obamacare and not the bone they have thrown for everyone else to fight over. Lets talk about the lies about just about everything that comes out of these stooges. JMHO
Ha --- carefully selected time frame. This has been going on for about 100 years
The third and final episode of Atlas Shrugged should be out in the theaters pretty soon. I can't wait to hear John Galt's radio speach. Boo Yah!
We had a budget surplus not long ago. First George Worst ever Bush cut taxes and increased spending with tens of billions on an unnecessary war in Iraq. Then Wall Street melted down and the Fed bailed them out. The budget deficit is slowly going down An improving economy and modest tax increased will slowly eliminate the deficit. Shutting down the government and this insane fight over debt ceiling increases and Ombacare accomplishes nothing.
We had an election in 2012 Ombama won and you tea bagger lost. Get over it.
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