As Milton Friedman once
put it, if you’re spending your own money on yourself, you care about price and
quality. If you’re spending someone else’s money on yourself, you only care about
quality. If you’re spending your own money on someone else, you care only about
price. And if you’re spending someone else’s money on someone else, you don’t
care about either.
The big news this
weekend is the closure of most of the US Federal government due to the failure
in Washington to pass a funding bill. At
first there is very little meaningful impact, and it’s widely expected to get quickly
resolved in a matter of days if not the next 24 hours, but both sides seem to
have talked themselves into a corner, and just possibly this shutdown might
last longer. In any event it’s another self-inflicted drag on the US economy,
at a time when an unusually cold winter is already weighing on the US
economy. It’s all about what happens
next or doesn’t. If there’s no fast
resolution, the markets could get very ugly by the end of next week.
Below, only in
America, as they say. Still it’s probably a good time to reduce risk. Will Davos get a lucky break?
With
apologies to P. J. O’Rourke
January 19, 2018 / 11:07 AM
U.S. government shutdown begins as spending bill fails in Senate
WASHINGTON (Reuters) - The U.S. government officially shut
down at midnight on Friday after Democrats and Republicans failed to reach a last-minute
deal to fund its operations, divided in a bitter dispute over immigration and
border security.
In a
dramatic late-night session, senators blocked a bill to extend government
funding through Feb. 16. The bill needed 60 votes in the 100-member Senate but
fell short with only 50 supporting it.
Most
Democrats opposed the bill because their efforts to include protections for
hundreds of thousands for the young immigrants known as Dreamers failed.
Huddled
negotiations by Senate majority leader Mitch McConnell and Senate Democratic
leader Chuck Schumer in the last minutes before midnight were unsuccessful, and
the U.S. government technically ran out of money at midnight.
The shutdown
formally began on Saturday, the first anniversary of President Donald Trump’s
inauguration.
Trump’s
administration immediately sought to blame Democrats.
“Tonight,
they put politics above our national security, military families, vulnerable
children, and our country’s ability to serve all Americans,” the White House said
in a statement.
The Trump
administration said it would not discuss immigration until the government is up
and running again. “When Democrats start paying our armed forces and first
responders, we will reopen negotiations on immigration reform,” the statement
said.
Until a
funding deal is worked out, scores of federal agencies across the country will
be unable to operate, and hundreds of thousands of “non-essential” federal
workers will be put on temporary unpaid leave.
The
Republican-controlled House of Representatives passed a stopgap funding measure
on Thursday. But Republicans then needed the support of at least 10 Democrats
to pass the bill in the Senate. While five Democrats ended up voting for the
measure, five Republicans voted against it.
Democratic
leaders demanded that the measure include protections from deportation for
about 700,000 undocumented immigrants known as Dreamers who arrived in the
United States as children.
----Although past government shutdowns have done little lasting damage to the U.S. economy, they can rattle financial markets.
The new
shutdown could trigger a political battle between Democrats and Republicans
over who is to blame.
It follows a
months-long struggle in Congress to agree on government funding levels and the immigration
issue.
January 19, 2018 / 3:47 PM
What happens in a U.S. government shutdown?
---In shutdowns, nonessential government employees are often furloughed, or placed on temporary unpaid leave. Workers deemed essential, including those dealing with public safety and national security, keep working, some with pay and others without.
After
previous government shutdowns, Congress passed measures to ensure that
essential and nonessential employees received retroactive pay.
The last
shutdown, in October 2013, lasted more than two weeks and more than 800,000
federal employees were furloughed. Here is what happened then, along with some
recent updates from officials:
MILITARY:
The Defense Department said on Friday that a shutdown would not affect the U.S.
military’s war in Afghanistan or its operations against Islamist militants in
Iraq and Syria. All military personnel on active duty would remain on normal
duty status. Civilian personnel in nonessential operations would be furloughed.
Defense Secretary Jim Mattis said a sustained funding impasse would cause ships
to go without maintenance and aircraft to be grounded.
JUSTICE: The
Justice Department has many essential workers. Under its shutdown contingency
plan, about 95,000 of the department’s almost 115,000 staff would keep working.
FINANCIAL
OVERSIGHT: The stock market-policing Securities and Exchange Commission funds
itself by collecting fees from the financial industry, but its budget is set by
Congress. It has said in the past it would be able to continue operations
temporarily in a shutdown. But it would have to furlough workers if Congress
went weeks before approving new funding.
The
Commodity Futures Trading Commission, meanwhile, would have to furlough 95
percent of its employees immediately. An agency spokeswoman said the
derivatives regulator could, however, call in additional staff in the event of
a financial market emergency.
NATIONAL
PARKS: National parks closed in 2013 and it resulted in a loss of 750,000 daily
visitors, said the nonprofit National Parks Conservation Association. The National
Park Service (NPS) estimated the shutdown resulted in $500 million in lost
visitor spending in areas around the parks and the Smithsonian museums. The
Trump administration has asked the NPS to examine ways to keep portions of some
parks open, but overnight visitors might have to pack out their own trash, the
Washington Post reported.
WASHINGTON
TOURIST SIGHTS: In 2013, popular tourist sites such as the Smithsonian closed,
with barricades going up at the Lincoln Memorial, the Library of Congress and the
National Archives. The National Zoo closed and its popular “Panda Cam” went
dark. The Smithsonian has said its museums could remain open for the first
weekend. The NPS, which oversees many Washington landmarks, including the
National Mall, has said it has a plan in place so that “First Amendment
activities” can continue during a shutdown.
TAXES: The
Internal Revenue Service furloughed 90 percent of its staff in 2013, the
liberal Center for American Progress said. About $4 billion in tax refunds were
delayed as a result, according to the Office of Management and Budget (OMB).
MAIL
DELIVERY: Deliveries would continue as usual because the U.S. Postal Service
receives no tax dollars for day-to-day operations.
TRAVEL: Air
and rail travelers did not feel a big impact in 2013 because security officers
and air traffic controllers remained at work. Passport processing continued
with some delays.
More
Trump Can Go to Davos With Government Shut Down, Officials Say
By Justin SinkAir Force One would still be allowed to fly in a shutdown, and necessary staff and security to support the president’s travels could accompany him, the officials said in a conference call with reporters. They insisted on anonymity as a condition of the briefing.
It’s not clear if Trump would choose to proceed with his trip to Davos during a shutdown, with hundreds of thousands of federal employees on unpaid furlough. The Switzerland event is an annual gathering of the world’s economic and political elite, where Trump plans to deliver a speech on his “America First” agenda.
He would be the first U.S. president to attend the forum since 2000.
Trump already postponed his departure for his Mar-a-Lago resort in Palm Beach, Florida, where he was to attend a high-dollar gala celebrating the first anniversary of his inauguration on Saturday.
January 19, 2018 / 10:56 PM
Mattis says a U.S. government shutdown would affect military operations
WASHINGTON
(Reuters) - U.S. Defense Secretary Jim Mattis said on Friday that a government
shutdown would impact military operations including some training, maintenance,
and intelligence operations.
“Our
maintenance activities will probably pretty much shut down ... Over 50 percent,
altogether of my civilian workforce will be furloughed ... We do a lot of
intelligence operations around the world and they cost money, those obviously
would stop,” Mattis said in response to a question about the impact of a
potential shutdown.
Separately,
the Defense Department said a shutdown would not impact the U.S. military’s war
in Afghanistan or its operations against Islamist militants in Iraq and Syria.
Mattis,
speaking during a question and answer period following a speech, said he would
leave this weekend for a trip to Indonesia and Vietnam. The Pentagon said in a
statement that Mattis’ trip to Asia would go ahead even in the case of a
government shutdown because it was necessary for national security and foreign
relations.
There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
J. K. Galbraith.
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