StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



#Cliffgate Begins: Why The Shutdown Will Last At Least A Week

01 Oct 2013
Posted by Stan Collender

This is being written several hours after the Senate summarily rejected yet another proposal from the House to tie funding for the government to changes in Obamacare.

The House then moved to do something it should have done days...or at least hours...ago: officially request a conference with the Senate on the continuing resolution so that formal negotiations over the fiscal 2014 continuing resolution can get underway. Senate Majority Leader Harry Reid (D-NV) then adjourned the Senate until 9:30 am EDT and indicated that he expects that the request for a conference will be rejected until the House adopts a short-term CR that funds the government.

What all of the legislative maneuvering means is that the federal government shutdown many (or perhaps most) people thought would be avoided has started and will be in effect for a while.

It also means that the question has now changed from "Will there be a shutdown?" to "How long will it last?".

Here's what you need to know about the logistics of the shutdown.

Federal agencies and departments will have until noon today EDT to lock the doors and shutter the windows, so if there's some resolution of the situation by lunch time there will be no appreciable impact of the lapse in appropriations that began at midnight October 1. For example, although few will realize it and the buildings are likely to be empty, you should still be able to get into the Smithsonian.

The real impact will start to be felt at 12:01 pm October 1 as agencies and departments cease operating. Calls will no longer be returned, visas and passports applications will no longer be accepted, tax refund checks will no longer be processed, invoices from contractors will stop being paid, etc. That will continue until the shutdown ends.

As I said 10 days ago, I'm projecting that the shutdown will last at least a week because it will take that long for the impact of the shutdown to start to be felt and, therefore, to make ending it more politically acceptable.

Consider the following:

1. The impact of the shutdown will barely start to be felt by noon today for the reasons noted above. There likely will even be some silly public statements by some elected officials that the shutdown is having no effect whatsoever.

2. From noon today until the close of business on Wednesday, there will be more amusement with the spectacle of the shutdown -- such as video of federal employees leaving their buildings, "closed" signs on department offices, people being turned away from national parks, less traffic on the roads in areas with high concentrations of federal employees -- than inconvenience with the lack of government services.

3. The inconvenience and, therefore, frustration, will grow steadily through the week. It will subside a bit over the weekend when most federal agencies are closed anyway and few people typically have any dealings with them. National parks and recreation areas will be obvious exceptions.

4. As the weekend comes to a close, the frustration will change to anger as anyone who works for or needs to deal with the government realizes that they are facing another week without a paycheck, an answer to their question, a tax refund, an invoice payment, access to the campsite they reserved a year ago at Yosemite or Yellowstone, etc.

5. This is the point at which there will start to be real pressure on members of Congress as the impact of the shutdown finally hits home for many people and the prospect of lost wages and less business becomes a reality.

6. This is also the point that contractors and businesses that rely indirectly on the federal government -- like the restaurants across the street from the big IRS facility in Fresno and the suppliers those restaurants use for everything from napkins to hamburgers -- start to realize how much this could hurt them if it's not resolved soon. Many will tell employees to stay home and those that get paid by the day will suffer.

7. Assuming the Democrats stay as united as they have been the past week, only 16 House Republicans will need to feel this pressure from their voters. When that happens, House Speaker John Boehner (R-OH) will have a tougher time convincing his members to stay together.

8. And that's the point at which at least a short-term break in the shutdown will be politically acceptable, or possibly even mandatory.

Number 7 seems wrong.

Number 7 seems wrong. Republicans would fire Boehner as speaker if he brought up a resolution to a vote with less than 100 republicans supporting it. Particularly with such an important "opportunity" as this one.


Re: Number 7 seems wrong

If Boehner brought up a clean CR right now, it would get a large majority of R votes. So the only way things stay shut down is if Boehner keeps blocking a clean CR, which he can only do (politically) if he can at least pass something to send over to the Senate. But if 17 Rs stop helping him do that, he loses the ability to pass anything without Democrats. Once that happens, Rs either suffer the image problem of not being able to pass anything at all, or Boehner brings up the clean CR and it passes by a huge margin.


Also,

If and when people see their 401ks drop, they will pick up the phones.

Congress will compromise when stocks drop 10 or 15 percent, be it from the Shutdown or default.

Thanks for the great blog!


Breaking the Deadlock

One, and only one, thing matters for resolving this: When the voters in Boehner's own district get few up. At that point, he will be motivated to bring up a clear CR, for which we already know there are sufficient votes. He might even decide to do what is right for the country, and do one for a whole year, not just a couple of months.

He could do the same thing on the debt ceiling, while he was at it. Get all the unoleasantness out of the way at once, so his constituents don't see him acting like a puppet with cut strings for any longer than they have already.

Yes, if may get a movement going to replace him as Speaker. But being Speaker of a House which is unable to actually do anything isn't really all that wonderful. Especially when you have to keep attending meetings full of reality-challenged fanatics.


Disagree on the likelihood of rebellion in Bohner's district.

You're assigning equal probabilities to a left-flank revolt as to a right-flank revolt.

I admittedly know nothing about the particulars of Bohner's district (I mean, I didn't even realize that the Wonka factory was in Ohio, much less that the OompaLoompas were naturalized citizens!) but if it's similar to the way the GOP redrew in Wisconsin then the risk of getting unseated from the left in a general election is infinitesimal compared to the risk of getting primaried from the right.

I think that his incentives run contrary to what you think they run.

I find it deeply ironic that the competitive GOP-held districts generally have moderate GOPpers ("moderate" relative to the modern GOP) and it is this population (not the Teahadis) that will inherit the wind.


my over/under day is now October 15

I was pretty sure that as soon as the government closed, this week was completely gone, and there is now a 90+% chance that this is correct. And the reasons that our host suggests are among the most relevant.

Missing from this analysis, however, is the fact that as soon as next Monday, October 7, dawns, we will be 10 days (or so) away from the government defaulting, and that will take up an increasing proportion of Congress' time. There have been recent murmurs about the House somehow combining the CR with a debt ceiling raise, but those seem to have been predicated upon the notion that the House somehow has some magic leverage with the debt ceiling that they do not have with the CR. I am convinced that this is wrong, but if the two issues are combined, then the Senate could send the House a "clean" combination by the weekend (Friday would be October 12), which there will be incredibly intense pressure to pass before the markets open on the morning of October 15, after Columbus Day. So October 15 would be the magic day. On the other hand, there's probably a 50% shot that the debt ceiling raise is the only thing that gets passed by then, which is why October 15 is the over/under day for me, right now.

Note: I say "10 days or so" in the paragraph above because the government shutdown in the short term may be allowing the Treasury to conserve some cash, but I do not know how much. I think it is highly unlikely to be enough to make the mandatory payments that need to be made at the beginning of November, however.




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