martes, 15 de octubre de 2013

The cost of shutting down the US government...

If you're in the tourism business or a small company for which the US government is an important client, you've felt the impact of shutting down the US government very directly. That the Congress has chosen to fund particular programs, program by program, leaves no doubt that the constituents served by those programs have made their voices and business cases heard. Unfortunately, if we have to rely on program by program approval to get a budget, we'll still be working on the 2014 fiscal year budget when the 2015 and 2016 budgets come along.

This is not the first occasion on which the US hasn't had a budget when the fiscal year began on October 1. It's happened twelve times since the 1970's. The average shutdown lasted 6-7 working days, according to research by Rabobank and the median reduction in growth during the quarter in which the government was shutdown was 0.9 percentage points of GDP. The last shutdown, during the Clinton Administration, was the longest, lasting 21 working days. We're already at eleven.

This time, the US is hitting the debt ceiling at the same time as the shutdown. The fallout from not raising the debt ceiling is much, much more serious than shutting down the government. If Congress doesn't raise the debt ceiling, authorizing the Treasury to pay for expenditures Congress already approved, default will be the outcome. When Treasury will run out of cash to pay all obligations falling due depends on how much more juggling of revenues and outflows Treasury's money managers can squeeze out of the system. But, that day is nearly upon us: Thursday in the worst of cases, the end of the month in the best.

Please, Speaker Boehner, call a vote. Save us from finding out whether default would be as devastating for the economy and financial system as the Lehman Brothers default in September 2008 was.

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