On Sept. 30, market futures were down nearly 1% on the Dow, Nasdaq, and S&P 500 as Wall Street looks to open negative on the final day before an expected government shutdown. These futures follow a 12 day trend where the Dow peaked on Sept. 18, and has since fallen by 600 points after the Fed’s non-committal FOMC, and the inability of Congress to create a consensus on the budget and Obamacare.
Additionally, the government also faces a secondary crisis where in 18 days, the nation’s credit card (debt ceiling) is expected to max out, cutting off the borrowing that now encompasses 40% of the government’s budget each year.
Moving to the US it now appears almost certain, according to DB’s Frank Kelly, that the US government will shut down at midnight tonight (September 30th) for the first time since 1996 after the Republican-controlled House of Representatives passed a continuing resolution early Sunday morning which would fund the government through to December 15th but included an amendment to delay Obamacare by one year and repeal a related tax on medical devices. The bill is now with the Democrat-controlled Senate where majority Leader Harry Reid has already stated the bill is unacceptable. As we write the Senate is not even set to come back into session until 2p.m. Monday afternoon leaving Congress just hours to avoid a shutdown. If no agreement is reached the federal government will shut down all nonessential operations on October 1st which will stay shut down until a new law is agreed by Congress and signed by the President. Frank’s current view is that a shutdown will not last too long and he has a baseline figure of around 2-5 days, with a lot depending on the public reaction to the shutdown. – Zerohedge
Back in 1996, the Republican led House of Representatives lost a showdown with President Clinton over a government stoppage due in part to the arrogance of then Speaker of the House, Newt Gingrich. The American people overwhelmingly gave their support to the President during this crisis, and the House was forced to back down. Ironically, after the crisis President Clinton began a more moderate stance on the economy, and for the rest of his term was able to work with the House to achieve many forms of consensus.
In 2013 however, both Congress, and the nation are much more divided, and consensus appears to be an impossibility due to overwhelming ideological differences. Senate Majority Leader Harry Reid has stated, and proven through the first round of voting that the Democrats will not listen to the American people, nor will they talk about compromise despite the enormous amount of evidence showing that Obamacare is causing a fundamental shift in the arena of jobs for most Americans. Since the beginning of 2013, around 80% of all jobs created are part time, or entail a 30 hour or less work week as companies realize Obamacare is a nail in the coffin of economic growth.
If there ever was a time for the Republicans to stand strong, and allow a government shutdown, it is at this time in history. Since no appropriation bills have been passed leading up to the new fiscal year at midnight tonight, and fresh off the public’s rejection of Obama’s warmongering in Syria, public opinion appears to be on the side of the Conservatives unlike in 1996. And as evidenced by the market just 18 hours before the clock strikes midnight, even Wall Street now agrees that a shutdown is inevitable as noted in the negative futures prices well before the opening bell.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, and hosts the popular web blog, The Daily Economist. Ken can also be heard Friday evenings giving an weekly economic report on the Angel Clark radio show.