What They’re NOT Telling You About The Government Shutdown!
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ZeroHedge| It’s official: as of midnight Saturday, the US government has shut down following a failure in the Senate to strike a funding deal. Government funding was due to run out after Dec. 8 but was twice extended, most recently through Jan. 19, at which point the US encountered what’s officially called a “spending gap,” which triggers an official halt to Washington’s work.
In retrospect, this is hardly a novel development, as history shows there have been 18 previous closures starting in 1976, with the last one taking place in September 2013. Almost all of the funding gaps occurred between FY1977 and FY1995. During this 19-fiscal-year period, 15 funding gaps occurred.
Additionally, seven of the funding gaps commenced with the beginning of the fiscal year on October 1. The remaining 11 funding gaps occurred at least more than one day after the fiscal year had begun. Ten of the funding gaps ended in October, four ended in November, three ended in December, and one ended in January.
According to the CRO, funding gaps have ranged in duration from one to 21 full days, with six of the eight lengthiest funding gaps, lasting between eight days and 17 days, occurred between FY1977 and FY1980—before the Civiletti opinions were issued in 1980 and early 1981. After the issuance of these opinions, the duration of funding gaps in general shortened considerably, typically ranging from one day to three days. Of these, most occurred over a weekend.
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So now that the US government is taking some time off for only the second time this century, here is a summary of what actually is shut down until the funding gap is closed, courtesy of Bloomberg.
1. What happens if the government shuts down?
Many, though not all, federal government functions are frozen, and many, though not all, federal employees are furloughed. Agencies in the executive branch, the one with the largest workforce and budget, regularly review shutdown plans that spell out what work must continue, and how many employees will be retained, during a “short” lapse (one to five days) and one that lasts longer.
2. Which government functions cease?
The ones that draw headlines are closures of national parks, monuments and the Smithsonian museums in Washington. Other activities that may stop if the shutdown lasts more than a few days include the processing of applications for passports and visas; new enrollments in experimental treatments under the National Institutes for Health; and the maintenance of U.S. government websites, including ones used by businesses and researchers. Mortgage approvals can be delayed by furloughs at the Internal Revenue Service and the Federal Housing Administration. The last shutdown, which lasted 16 days in 2013, delayed release of Labor Department monthly employment reports, Commerce Department data on retail sales and housing starts and a monthly Fed report on industrial production that uses Labor Department data. Also delayed was approval of drilling applications at the Bureau of Land Management, consideration of applications for small business loans and the start of the Alaska crab season, which relies on harvest levels apportioned by the National Oceanic and Atmospheric Administration.
A breakdown by organization:
The Treasury Department, which includes the IRS, will send home more than 83 percent of its 88,268 workers.
The Executive Office of the President will be dramatically pared down, according to a memo released on Friday night.
Securities and Exchange Commission
Operations at the Securities and Exchange Commission are set to be sharply curtailed.
Commodity Futures Trading Commission,
At the country’s main swaps regulator, the vast majority of activity will likewise grind to a halt.
Business and Economy
The shutdown is likely to postpone the release of market-moving economic data, depending how long it continues.
Workplace Safety & Labor
Many programs at the Department of Labor designed to help workers will stop. Other federal offices designed to protect workers’ rights will also close their doors.
Law Enforcement & Courts
The law exempts from the shutdown those employees who are deemed necessary to protect life or property. Most types of law enforcement and criminal justice fit into that category.
National Security & Foreign Affairs
The effects of a shutdown on foreign and trade policy may be minimal.
About half the staff at the Department of Health and Human Services will be furloughed, according to a plan posted on the department’s website Friday. The resulting changes will reverberate across a range of functions that affect the average person.
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3. Which government functions continue?
Activities related to national security (like the military services), safety and order (air traffic control, law enforcement) and medical care (veterans’ hospitals) are among the essential activities that carry on. So does the U.S. mail, since the Postal Service has its own funding stream. U.S. Treasury debt auctions continue, Social Security and Medicare checks get mailed, food stamps are distributed. Federal courts are open but their work is subject to disruption.
4. How many federal employees stay home?
In the 2013 shutdown, the number of executive-branch employees who were furloughed on a given day peaked at 850,000, or about 40 percent of the workforce.
5. Do federal employees get paid?
Eventually. When a shutdown happens, most federal employees — there are about 2.8 million of them now — are placed on unpaid furlough. Though there “appears to be no guarantee” that they will eventually be paid, in practice they always have been, retroactively, via legislation passed by Congress, according to the Congressional Research Service.
6. How often does this happen?
There have been 12 shutdowns since 1981, ranging in duration from a single day to 21 days, according to the Congressional Research Service. The 21-day one, in December 1995 and January 1996, was a famous budget showdown that pitted President Bill Clinton, a Democrat, and the Republican House speaker, Newt Gingrich. Shutdowns over budget disagreements are different (and less grave) than what would happen if the U.S. breached its debt ceiling and defaulted on some of its obligations. That’s never happened — though its specter, too, will grow if Congress doesn’t reach a budget deal in the next several weeks.
7. What happened prior to 1981?
Until then, “funding gaps” didn’t result in shutdowns; agencies operated mostly as normal, and their expenses were covered retroactively once a deal was reached. Benjamin Civiletti, attorney general under President Jimmy Carter, put an end to that. With legal opinions issued in 1980 and 1981, he established that government work generally must cease until Congress agrees to pay for it. His rulings were codified in the Antideficiency Act, which, in theory at least, authorizes fines or prison terms to federal employees who dare work for free during a shutdown.
8. How Do Markets React
Markets have tended to shrug off shutdowns as long as the debt limit is not involved. The 1995, 1995-96, and 2013 government shutdowns had a modest effect on financial markets. The dollar weakened slightly in all three cases in the few days following each shutdown, with a further leg down in 2013 as the debt limit deadline approached. Treasury yields did not react meaningfully at the start of these shutdowns. The equity market reaction was inconsistent, with a slight decline in the early days of the December 1995 and October 2013 episodes, but no real change around the November 1995 shutdowns.
This time around, the debt limit deadline is around six weeks away from the Treasury’s target, and even farther from our own estimate, so unless the shutdown lasts for over a month, the market should largely ignore it.
NOTE: The forward of this article was written by economist and survivalist, Brandon Smith, who will be watching the latest game being played out by this US government entity so please follow his website to get updates as the situation continues to unfold at Alt-Market.com.
After years of fake drama in D.C. over government spending impasses (when we know both parties actually love the idea of bigger government), it finally happened: Shutdown. Now, this shutdown in itself is not necessarily an issue, especially if it lasts less than a couple weeks. However, if this drags on for a considerable amount of time (months), then there are some serious implications which many people wrongly downplay. For example, US debt issuance and the foreign purchasing or holding of Treasury bonds may suffer a blow at a time when the Treasury market is highly sensitive to crisis. Also, the moment is potentially ripe for a false flag attack, as “government shutdown” can be blamed for Federal inability to “stop the terrorists”, and the call for MORE government might suddenly resonate with the public. Alt-Market will be watching this development carefully to see if it fizzles, or escalates…
The U.S. Senate was short of the votes needed to approve a bill to keep the federal government running as a midnight deadline loomed on Friday night, although high-level negotiations continued.
In a dramatic late-night session, Senate majority leader Mitch McConnell left voting open despite appearing to fall well short of the 60 votes needed to keep alive a stopgap bill that would fund the government through Feb. 16.
As the clock ticked toward midnight, McConnell and Senate Democratic leader Chuck Schumer huddled in negotiations in a room just off the Senate floor.
Without some type of funding bill, the U.S. government technically will run out of money right after midnight, on the first anniversary of President Donald Trump’s inauguration. That would leave scores of federal agencies across the country unable to continue operating, and hundreds of thousands of “non-essential” federal workers would 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.
****EDITOR’S NOTE: PLEASE REMEMBER TO SCROLL DOWN AND LISTEN TO THE INFORMATION INTERVIEW IN ORDER TO HELP YOU AND YOUR FAMILY CONNECT THE DOTS AS TO WHAT MAY TRANSPIRE AS EARLY AS LATE SUMMER/EARLY FALL IN AMERICA. THANK YOU!****
This article by Michael Snyder was originally published by theeconomiccollapseblog.com.
J.C. Penney and Family Christian Stores are the latest retail giants to announce widespread store closings.
As you will see below, J.C. Penney plans to close between 130 and 140 stores, and Family Christian is closing all of their 240 stores.
In recent months the stock market has been absolutely soaring, and so most people have simply assumed that the “real economy” must be doing well. But that is not the case at all. In fact, the retail apocalypse that I have been documenting for quite some time appears to be gaining momentum.
J.C. Penney is not in as rough shape as Sears is just yet, but it is definitely on a similar trajectory. In the end, they are both headed for bankruptcy. That is why it wasn’t too much of a surprise when J.C. Penney announced that they are getting rid of about 6,000 workers and closing at least 130 stores…
J.C. Penney (JCP) plans to close 130 to 140 stores and offer buyouts to 6,000 workers as the department-store industry sags in competition with online sellers and nimble niche retailers.
The company said Friday that it would shutter 13% to 14% of its locations and introduce new goods and services aimed at the shifting preferences of its customer base.
Meanwhile, many observers were quite surprised when Family Christian Stores decided to fold up shop for good. They were known as the largest Christian retailer on the entire planet, but now after 85 years they are going out of business forever…
Family Christian, which bills itself as the “world’s largest retailer of Christian-themed merchandise,” announced Thursday it is closing after 85 years.
The non-profit company, employing more than 3,000 people in 240 stores in 36 states, said in a brief statement that the retailer had been facing declining sales since filing for bankruptcy protection in 2015 and had no choice but to shut down.
These two announcements are part of larger trend that we have been witnessing all over the country. As I have documented previously, Macy’s announced that it would be closing 100 stores earlier this year, and about the same time Sears said that it would be closing another 150 stores.
Back in 2010, Sears had a staggering 3,555 stores.
Before their recent announcement, Sears was down to 1,503 stores, and now this latest round of cuts will leave them with somewhere around 1,350.
Of course it won’t be too long before Sears has zero stores, and my regular readers know that I have been talking about the demise of Sears for a very long time.
The cold, hard truth of the matter is that the “real economy” is a total mess, and that is one of the primary reasons why these ridiculous stock market valuations that we are seeing right now are not sustainable.
One expert that agrees with my assessment is former Reagan Administration White House Budget Director David Stockman. In a recent interview, he explained why he believes that “everything will grind to a halt” after March 15th…
Stockman, who wrote a book titled “Trumped” predicting a Trump victory in 2016, says, “I don’t think there is a snowball’s chance in the hot place that’s going to happen. This is delusional. This is the greatest suckers’ rally of all time. It is based on pure hopium and not any analysis at all as what it will take to push through a big tax cut. Donald Trump is in a trap. Today the debt is $20 trillion. It’s 106% of GDP. . . .Trump is inheriting a built-in deficit of $10 trillion over the next decade under current policies that are built in. Yet, he wants more defense spending, not less. He wants drastic sweeping tax cuts for corporations and individuals. He wants to spend more money on border security and law enforcement. He’s going to do more for the veterans. He wants this big trillion dollar infrastructure program. You put all that together and it’s madness. It doesn’t even begin to add up, and it won’t happen when you are struggling with the $10 trillion of debt that’s coming down the pike and the $20 trillion that’s already on the books.”
Then, Stockman drops this bomb and says:
“I think what people are missing is this date, March 15th2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”
In that same interview, Stockman also predicted that “markets will easily correct by 20% and probably a lot more“, and he noted the glaring disconnect between current stock prices and how the U.S. economy is actually performing…
“The S&P 500 has been trading at 26 times earnings while earnings have been dropping for the past six or seven quarters. There is no booming recovery coming. There is going to be a recession and there will be no stimulus baton to bail it out. That is the new fact that neither Trump nor the Wall Street gamblers remotely understand.”
It is very difficult to argue with Stockman on this.
There are some people out there that seem to think that Donald Trump can miraculously turn the U.S. economy around just because he is Donald Trump.
It doesn’t work that way.
We are 20 trillion dollars in debt, and we are currently adding about a trillion dollars a year to that total. There is no possible way that Trump can cut taxes, increase military spending, build a border wall, spend much more on veterans and spend an extra trillion dollars on rebuilding our crumbling infrastructure.
We are flat broke as a nation and there simply is not money available to do everything that Donald Trump wants to do.
So we shall see what happens after March 15th. Unfortunately, I happen to agree with Stockman that economic reality is about to come knocking and Trump and his supporters are about to get a very rude wake up call.
Interview: Former White House Budget Director David Stockman – Everything Will Grind to a Halt in 2017
About the author: Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years. Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.