Congress at the midnight hour has passed a deal to re-open the government and raise the debt ceiling, yet this deal is amazingly short lived. The political theater has been unbelievable and once again the problem with America's economy is completely irresponsible politics versus external events. Instead of focusing in on the responsible thing, which of course is to not destroy the United States and global economy, the press is now having a field day with who blinked first in this very dangerous game of political chicken.
The vote in the Senate was 81 to 18. The House vote was 285 to 144 with 87 Republicans voting yes. Obama wasted no time in shoving the disastrous immigration bill down people's throats, so clearly on the administration side, the government still didn't learn anything or wake up to the interests of America's citizens either.
Frankly, who cares who blinked politically and if one does care, obviously they blinked way too late. The point of this entire exercise in political gamesmanship has been to put the American economy on the table as Calvinball, which should never be allowed. To do such behavior is outright traitorous and as such should be banned, stopped, once and for all.
The great deal is actually kicking the can down the road where more of this insanity political shenanigans can occur. The bill which just passed in the nick of time funds the government just until January 15th and also only raises the debt ceiling until February 7th. There is payback for the almost 1 million federal workers sent home without pay due to the shutdown and income verification for Obamacare subsidies, which leads us to how that will be implemented.
Bottom line the great deal just opens the door for this all happening again in just a few months. America is so sick and tired of these let's drive America off the economic cliff games. What has the game Of Debt Ceiling Chicken and repeatedly heading for a head on collision cost the United States? A lot, even with disaster averted at the 11th hour.
In spite of the last minute raising of the debt ceiling to avert disaster, economic damage has already been done. Now the real financial consequences are starting to rear their ugly heads and with this deal simply delaying the same game for three months, confidence from business, foreign governments and citizens has strongly eroded, America's reputation tarnished and lord only knows the emotional toil such economic stress unnecessarily forced upon America's citizens has done.
Yesterday Fitch placed the United States AAA credit rating on watch negative and the reason is purely over the Tea Party crossing the Rubicon and willing to destroy the United States economy to get their way.
Fitch Ratings has placed the United States on Rating Watch Negative on the high risk that US authorities will not raise the debt ceiling in a timely manner before the Treasury exhausts extraordinary measures on 17 Oct.
While S&P says it is doubtful they will lower the United States credit rating further, they have quite the damning report on the negative consequences the shutdown and debt ceiling hostage taking has already had.
The shutdown has shaved at least 0.6% off of annualized fourth-quarter 2013 GDP growth, or taken $24 billion out of the economy. However, the closer we get to breaching the debt ceiling, the higher we expect the economic impact to be.
That's actually quite a bit of GDP, 0.6 percentage points in a two week time period to be removed and it shows just how important a functional government is to an economy. Ff Q4 is a slow quarter normally, Congress could have just caused negative economic growth for Q4. That's quite an expensive game the Tea party is playing which of course will never be recognized as costing America so much. The political brinkmanship has cost more than 0.6 percentage points in direct economic activity. Another 0.4 percent points is due to consumer confidence. The crazy Congress has struck fear in the hearts of Americans and thus they will be less willing to spending during the all important holiday season.
The bottom line is the government shutdown has hurt the U.S. economy. In September, we expected 3% annualized growth in the fourth quarter because we thought politicians would have learned from 2011 and taken steps to avoid things like a government shutdown and the possibility of a sovereign default. Since our forecast didn't hold, we now have to lower our fourth-quarter growth estimate to closer to 2%.
Speaking of dysfunction, if the United States had defaulted, even for 24 hours, the economy would have immediately gone into a recession.
Should a default occur, the resulting sudden, unplanned contraction of current spending could see government spending cut by about 4% of annualized GDP. That would put the economy in a recession and wipeout much of the economic progress made by the recovery from the Great Recession.
According to Moody's the economic consequences so far are just the start. These never ending political power games are keeping the economy stunted:
I’m increasingly of the view that the reason why our economy can’t get into a higher gear is because of the uncertainty created by Washington, that this brinkmanship which happens every 3, to 6, to 12 months is corrosive on our collective psyche and it’s weighing on our willingness and ability to take risk,
We agree, the insanity of D.C. doing political favors and special interests instead of policy based on solid economics and statistics are enormous. This is beyond the now extremes of these politicians, on any given day one will find special interests writing and getting passed legislation which usually will only help themselves at the expense of the American people. Zandi additional estimated the United States economy has lost 1.5 to 3.0 percentage points in GDP growth from these politicians each year. If anyone has noticed, jobs and U.S. citizens are the latest thing on this administration's or the Congressional agenda.
The games of D.C., in particular the Tea party, have been an absolute embarrassment as foreign nations and businesses view the U.S. more and more as an unstable and crazy place. Worse, foreign governments holding the U.S. debt are really shaken. China has been stressing as the largest holder of U.S. debt, watching helplessly as politicians play with default The Federal Reserve noted in their beige book many businesses were worried about the ongoing shutdown and debt ceiling, and that these political games put the entire economy into uncertainty.
Look, idiots, Obamacare is not worth it. If you would just let it come into effect with the glaring problems, easily one could find support to improve it.