October 02, 2013
Debt Ceiling Watch (III)
Lots of pooh-poohing of the implications of a debt-ceiling crisis. It's instructive to examine what happened to equity markets when we last came close to a breach, but the Government didn't actually default.
Figure from Torsten Slok, Deutsche Bank, October 2013 presentation [not online].
In other news, Rand Paul says there is no need to raise the debt ceiling. 
Posted by Menzie Chinn at October 2, 2013 07:29 PMdigg this | reddit
People don't realize how bad the shut down impacts regular government workers. Hopefully they get this fixed and soon.
Posted by: Frank at October 2, 2013 10:43 PM
Are you arguing that policy should be set to maximize the value of the S&P 500?
I would argue that the second fall was associated with the Arab Spring's oil shock. The US wavered but didn't collapse. Europe did, and has yet to recover.
So did the debt ceiling debate cause Europe to collapse, but US GDP growth to accelerate? Then clearly, the debate must have been good for growth, if that's the metric we're to use.
Posted by: Steven Kopits at October 3, 2013 05:02 AM
Why not do a more interesting post? It would be worthwhile to see how the government's cash flows would develop absent an increase in the debt ceiling. I think that will tell us more about the politics than anything else would.
Posted by: Steven Kopits at October 3, 2013 05:15 AM
CNBC on the stock market and government shutdowns:
Posted by: Steven Kopits at October 3, 2013 05:20 AM
Correlation does not imply causation.
Where is the analysis?
Posted by: Ricardo at October 3, 2013 05:26 AM
Very interesting chart, Professor Chinn..
I agree with Sen Paul...Can the left take a break in their interminable spending binge.?
Perhaps we can get the DEA and or the ATF, to arrest this addiction...Or is spending protected
under the ADA?
Posted by: Hans at October 3, 2013 05:27 AM
Very interesting chart, Professor Chinn..
I agree with Sen Paul...Can the left take a break in their interminable spending binge.?
Perhaps we can get the DEA and or the ATF, to arrest this addiction...Or is spending protected
under the ADA?
Posted by: Hans at October 3, 2013 05:27 AM
The Republicans over the last three years have engineered a reduction in the US deficit faster than any time since WWII. Menzie has made the point many times that government spending has been going down and we are seeing more signs of recovery. Thank the Republicans House.
Republicans have, in the last two terms, masterfully whittled down federal spending, often with precisely this form of brinksmanship.The Senate bill funds the 2014 government at a level 18 percent below the president proposed five years ago; 17 percent below the Democratic Congress proposed four years ago; 10 percent below Paul Ryan and Republicans proposed three years ago; and 8 percent below the debt ceiling compromise two years ago (see graph, via Michael Linden and Harry Stein). The Senate bill is less than 2 percent away from Paul Ryan's own 2014 budget.
The Austerity Caucus has won the biggest fights in Washington since 2010, and now, having achieved the fastest-shrinking deficits since demobilization after World War II"
Posted by: Ricardo at October 3, 2013 05:44 AM
Maybe people don't much care how the shutdown 'impacts regular government workers.' For the good reason that they have their own lives to live (which is the reason Jay Leno, got a laugh from his line, 'How many are worried it will start up again?').
But, does anyone else see the same trend line I do in Menzie's graph.
Posted by: Patrick R. Sullivan at October 3, 2013 07:19 AM
This is the frightening part - Obama trying to orchestrate a sell-off to teach us all a lesson not to mess with the Progessive agenda. Furthermore, he has gone out of his way to inflict pain and hardship druing the shutdown to teach America that it's his way or the highway. We can expect more of the same as we approach the debt ceiling "debate".
And, Obama's mouthpiece, Harry Reid, making xenophobic comments like this - The Majority Leader denounced McClintock-Toomey as the "Pay China First Act."
The McClintock-Toomey bill replicates the guarantees that state constitutions have had for hundreds of years to strengthen investor confidence. It gives the Treasury Secretary discretion to prioritize among other federal obligations until the political deadlock ends, tempers cool and the parties can reach a deal. But it makes his first priority to protect the full faith and credit of the U.S.
For people who claim that defaulting on U.S. debt is unthinkable, President Obama and Harry Reid are sure behaving as if they can't wait for that day to arrive. Why else are they refusing to take up the multiple Republican offers to guarantee that the U.S. will never default?
It's troubling that the pattern with Progessive Democrats is that they accuse Republicans of not wanting to pay the bills, but the Progressive Democrats don't want to pay the lenders.
Obama trying to scare the markets into a selloff -
In an exclusive interview with CNBC, the president warned Wall Street that this shutdown could be different. Previous halts in nonessential government activities have caused little market reaction, with major averages actually rising most of the time in the month after the shutdowns are settled.
Obama's remarks indicated to some observers that he is trying to push investors out of the relative complacency they have shown so far. Futures were broadly lower Thursday, indicating markets may be taking heed.
Obama has now taken ownership of any default. It's his choice.
Posted by: tj at October 3, 2013 07:53 AM
Steven Kopits: No, I never argued for maximization of equity prices as a macro goal, nor do I argue for minimization of bond yields, etc. The point is that equity prices are the present discounted value (using risk adjusted discount rate) of dividends in a standard asset pricing model. A decrease in an equity price index can be interpreted then as a decrease in the expected dividend stream (partially a function of profits) or an increase in the risk free rate or the equity premium. None of these seem like particularly good outcomes. Hence, I take the S&P500 as an indicator. I would have thought this was obvious to you.
Posted by: Menzie Chinn at October 3, 2013 08:16 AM
tj: Hmm, you believe President Obama wants a sell off in the stock market? I guess I must be thankful that at least no black helicopters were invoked in your comment, but really, that is quite bit of paranoid screed.
I agree on this point; a better nickname for the McClintock-Toomey bill would have been "Pay Foreigners First Act", since China holds only about 1/4 of total foreign holdings, while foreign holdings are about half of total Federal debt held by the public.
Posted by: Menzie Chinn at October 3, 2013 08:30 AM
I would caution you about too much optimism.
Remember that the debt ceiling was $14.3T in August 2011, and ist $16.7T just 26 months later. So $2.4T more in debt has been accrued, even though the last two years were much higher tax revenue than we are likely to see in average years.
If the economy softens, tax revenue will fall sharply, and debt will accrue at an even faster rate.
That the debt ceiling was only $9T in 2006 almost seems quaint now.
Posted by: Darren at October 3, 2013 08:41 AM
I work in Manhattan, so no, I don't believe that short term movements in the price of shares reflects longer term trends, particularly for transient effects. Rather, I think price movements reflect the algorithms of high frequency trading programs, which are more likely to reflect near term technical considerations rather than long-term fundamentals.
And the very graphs you present support that thesis. As you can see, as soon as the uncertainty goes away, the share price bounces back quite quickly--so long term investors who sold into the dip were entirely wrong.
Don't misunderstand me. It's not that I am unmoved by short-term market developments, but that's not the reason to either shut down the government or keep it open. Nor would I shut down the government over Obamacare, much as I am concerned about the cost and its general intrusiveness.
However, to pass the FAA (the performance incentive plan which I outlined a couple of days ago) very much is a reason to shut down government. If you passed the FAA, I think you'd put 1,000 points on the DOW in short order. I would pass it and tell the House Republicans to leave town and let the Dems and Administration think it over. The government would get its debt ceiling increase, all the Obamacare it can eat, and Republicans would get an incentive system that strongly encourages Democrats (and Republicans) to maximize sustainable growth. You want to debate that?
Posted by: Steven Kopits at October 3, 2013 09:17 AM
Steven Kopits: Six months to restore pre-shock nominal price levels is "quickly"?
Posted by: Menzie Chinn at October 3, 2013 09:56 AM
If Obama does not want the economy to tank to support his government shut down then why is he talking it down?
Posted by: Ricardo at October 3, 2013 10:07 AM
It is mighty hard to see Ricardo and his ilk (yeah, you guys are "ilk") as anything other than weeds in the garden here. Aping the silly low-brow rhetoric of the Fox news crowd either means you ilk don't know you're being spoon-fed a bunch of partisan bile, or you think the partisan bile is going to convince people who read Menzie's stuff. I'm curious to know which it is, but only a little.
People who run around saying "Obama's government shutdown" don't matter very much, 'cause they don't have anything new, or true, to say. The only purpose they serve is as a conduit for low-brow talking points from cheap politicians. Sort of like a cardboard tube or a bit of rubber hose.
Posted by: kharris at October 3, 2013 10:22 AM
I would liken the current standoff more to the initial vote on the TARP, which failed and sent the markets plunging because it made clear that Congress could not be trusted to do the right thing. Of course, they reversed themaselves a few days later after they got enough political blowback for their irresponsibility, but the damage had already been done.
Posted by: Joel Gaughan at October 3, 2013 10:24 AM
I agree on this point; a better nickname for the McClintock-Toomey bill would have been "Pay Foreigners First Act",
That's quite an admission. Reid didn't want to pass the bill because some of the lenders were Chinese. You extend his xenophobic logic to all foreign lenders. You set a great example for your students - the government should consider the nationality of a lender when deciding which lenders to repay first.
The entire shutdown could have been avoided if Obama had directed Reid to accept the bargain - Delay the individual mandate for 1 year. The House proposed delay would actually reduce the federal deficit by $36 Billion dollars.
As passed by the House of Representatives on July 17, 2013
H.R. 2668 would delay the implementation of several provisions related to the expansion of health insurance coverage established by the Affordable Care Act (ACA, Public Law 111-148 and the health care provisions of P.L. 111-152). Title I of H.R. 2668 would delay for one year the requirement that most residents of the United States have health insurance coverage by January 1, 2014. Title I also would shift by one year the schedule of penalties for people who do not comply with that mandate.
CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 2668 would reduce federal deficits by roughly $36 billion over the 2014-2018 period
Posted by: tj at October 3, 2013 10:56 AM
ADDENDUM: the market crash and economic turmoil that followed probably sealed the election for Barack Obama.
Posted by: Joel Gaughan at October 3, 2013 11:00 AM
A 20% gain in six months? Yes, that qualifies as "quickly".
You ready to have that debate yet?
Posted by: Steven Kopits at October 3, 2013 12:03 PM
Steven Kopits: Well, six months is a long time in my book. Guess we have different ideas of time.
On the debate, I'm sure it's an intellectually interesting exercise, but in my book completely implausible politically. Anyway, I'm still smarting from the executive-stock-options-align-incentives-correctly-such-that-agency-problems-disappear episode.
Posted by: Menzie Chinn at October 3, 2013 02:58 PM
It is irresponsible to use or to reward the use of a government shutdown to negotiate budgets or other legislation.
To use or reward the threat of a US government default to negotiate budgets or other legislation is extortion.
Posted by: ottnott at October 3, 2013 02:58 PM
Another example of Obama trying to maximize pain rather than minimize the impact of the shutdown.
A spokeswoman for the National Park Service told MyFoxDC that it is still federal land, and the rule is that if there’s no Congressional appropriation, no visitors are allowed.
Can someone point me to the "rule" that says "if there's no Congressional appropriation, no visitors are allowed."? These parks are on public land but receive no government funding.
It took 2 parties to create the shutdown, but Obama is quickly taking ownership of the effects. As Menzie likes to say, they have a name for people like that. (Community Organizer)
Posted by: tj at October 3, 2013 03:12 PM
The rule comes from the Secretary of the Interior. Legal authority for the rule is from:
CFR › Title 36 › Chapter I › Part 1 › Section 1.5
Closures and public use limits.
(a) Consistent with applicable legislation and Federal administrative policies, and based upon a determination that such action is necessary for the maintenance of public health and safety, protection of environmental or scenic values, protection of natural or cultural resources, aid to scientific research, implementation of management responsibilities, equitable allocation and use of facilities, or the avoidance of conflict among visitor use activities, the superintendent may:
(1) Establish, for all or a portion of a park area, a reasonable schedule of visiting hours, impose public use limits, or close all or a portion of a park area to all public use or to a specific use or activity.
Posted by: ottnott at October 3, 2013 04:10 PM
tj It took 2 parties to create the shutdown, but Obama is quickly taking ownership of the effects.
Somehow I don't think Obama was getting giddy drunk and singing songs about the coming shutdown while behind caucus doors. And then staggering to the House floor reeking of booze.
Has Fox Noise been playing those tapes from last March of Tea Party politicians promising a government shutdown?
And since the news media sometimes mixes things up, here's a quick summary of the furlough facts:
(1) Furloughed employees are not being paid and will not get paid for time away from work unless Congress agrees to give them back pay. Furloughed employees are NOT allowed to perform any duties whatsoever. They cannot even turn on their Blackberrys or laptops. BTW, that law applies to Congressional staffers who are on furlough. Any staffer working for a Tea Party Congress critter is committing a crime even if it is voluntary. Any Congress critter who knows that a staffer is working without pay is also committing a crime (Anti-Deficiency Act). That's something every government employee knows by heart.
(2) "Excepted" employees are those who are required to work because of public safety. This would include federal marshals, Capitol police, air traffic controllers, TSA, FBI, etc. These workers will probably get paid eventually, but it is not guaranteed. If history is a guide they may have to wait several months for back pay. Excepted employees cannot take any leave and forfeit holiday compensation.
(3) "Exempted" employees are those who must come to work because they have been assigned to projects that are funded through prior year carryover reimbursable projects. Exempted employees are supposed to get paid as usual; however, since the OPM and DFAS payroll workers are on furlough it is unlikely paychecks will go out until after the CR is resolved.
Posted by: 2slugbaits at October 3, 2013 04:47 PM
ottnott at October 3, 2013 02:58 PM
"It is irresponsible to use or to reward the use of a government shutdown to negotiate budgets or other legislation."
I agree. However, I also find the present spending plans of the USG to be irresponsible. Entitlements at current levels are simply unsustainable under any reasonable scenario. The difference is in timing of adjustments. "Responsible" liberals say "not now - we need fiscal stimulus," whereas others say "yes, now." One thing not factored into the sentiment that we need more fiscal stimulus is the effects of leakage through the current account, where deficits in my view are also unsustainable.
Posted by: don at October 3, 2013 06:16 PM
No Ottnott, tj is right. The closing of these parks is an illegal abuse of power on the part of the administration.
As you note, the only justification for this action is 36 CFR 1.5 which provides the conditions under which the park service can close a park that is on federally owned lands. The authorities can close a park if they determine that it is necessary for "public health and safety" or to protect "natural or cultural resources." But the rule goes on to say that except in cases of emergency, if the closing has a significant effect or is highly controversial among other things, the decision should be published as a rule in the Federal Register. Also, unless it is an emergency, the superintendent should prepare a written justification explaining why the closing was necessary and why less stringent actions were not taken. That written justification should be available to the public.
To see whether the administration has followed the law, we need to look at some particular cases. Warren Meyer, whose North Phoenix company runs over 100 Forest Service campgrounds, explains what happened in his letter to his congressmen. Despite being told the day before by the US Forestry service that his campgrounds would not be closed, the Forestry service suddenly reversed course because people "above the department" had ordered them to. Mr. Meyer notes that the campgrounds are completely self-funded by fees paid at the gate and that he employs only private workers. The company actually operates as a concession and pays rent to the Treasury for the use of the land. Thus, in a government shutdown, the Treasury will actually lose funds by this action.
What is the emergency? Why wasn't this rule published in the Federal register? Why is there no written justification? What is the threat to public safety?
Another good example is the Claude Moore Colonial Farm in Mclean Va. They have been fully privately funded since 1981 and have never been closed in any previous government shutdown, including the shutdown of 1995 during the Clinton years. You can read the facts from Managing Director Anna Eberly on their website. The agreement they have with the park service is that the farm will operate the park using privately collected funds and the only service the park service will provide is police services, if needed. As Ms. Eberly notes, the Fairfax police have joint jurisdiction and the farm can call them also if they need police services.
So far, the farm has had to cancel every event this week and is down $15,000 in income in October, their busiest month. If they stay closed, their survival is in jeopardy. And yet, the park service has threatened to arrest farm staff who have stayed on the job this week.
Again, what is the threat to public safety? Wis the emergency? Where is the written justification? Where is the publication of the rule in the Federal Register?
These are just two examples of the shocking lengths the Administration is willing to resort to make the shutdown as painful as possible, even if it means an illegal abuse of power.
I linked to a video in a previous comment, but it's so revealing that I must post the link again. Dana Bash of CNN asked Harry Reid if he we support a Republican bill to restore funding to the NIH during the shutdown, so that children with cancer could get their treatments. Reid said: "Why should I do that? I've got 100 people at Nellis Air Force base sitting at home. They've got problems too."
The Administration and their allies in Congress are so determined to make the shutdown as painful as possible for the American people that they are willing to deny medicine to children. Watch the video and be appalled.
Posted by: Rick Stryker at October 3, 2013 07:02 PM
“But the rule goes on to say that except in cases of emergency, if the closing has a significant effect or is highly controversial among other things, the decision should be published as a rule in the Federal Register.”
The emergency is blindingly obvious: Congress did not appropriate funds for the current fiscal year, requiring the National Parks Service to furlough almost all personnel and to cease non-essential activities that could create any financial obligations.
Rick's first example of what he considers an illegal abuse of power is the closing of some Forest Service campgrounds:
“Mr. Meyer notes that the campgrounds are completely self-funded by fees paid at the gate and that he employs only private workers.”
Camping does not qualify as an essential activity, so the campgrounds have been “furloughed”. The fact that the campgrounds are self-funded by fees is not relevant if, by allowing the campgrounds to continue operation, the Forest Service would be creating financial obligations not specifically funded by those fees. For example, is the Forest Service obligated to maintain roads through FS land to the campgrounds? Conduct inspections of the campground? Process rent or audit receipts and expenses? Provide wildlife control or monitor wildlife for rabies or other diseases that might be transmitted to campers? Provide law enforcement services? Warn or evacuate campers if a wildfire threatens the area? A “yes” to even one question of this type would mean that the Forest Service would be in violation of the law if they allow the campgrounds to remain in operation.
“The company actually operates as a concession and pays rent to the Treasury for the use of the land. Thus, in a government shutdown, the Treasury will actually lose funds by this action.”
The Interior department isn't furloughing employees and closing sites to save money. The actions are required by law, because Congress hasn't appropriated funds for the current fiscal year. Inconveniences, outrages, unnecessary expenses, and losses of revenue are unavoidable when Congress fails to provide funding.
Rick's second example of what he considers an illegal abuse of power is the closing of a privately funded “Colonial Farm” situated on National Park Service property:
“The agreement they have with the park service is that the farm will operate the park using privately collected funds and the only service the park service will provide is police services, if needed. As Ms. Eberly notes, the Fairfax police have joint jurisdiction and the farm can call them also if they need police services.”
Even if NPS agrees that the site could operate safely without NPS police services, the law requires NPS to close it if operation of the site creates unfunded financial obligations for NPS. For example, if the NPS legal counsel determines that private operation of the site doesn't shield NPS from liability if visitors are injured, NPS might have to inspect the site and any certifications the farm requires for its activities. Given that the colonial farm now hosts an active, for-profit event and catering business ( http://jrspicnics.com/turkeyrun.shtml ) and has added a lot of infrastructure for those catered events (climbing wall, outdoor “rain room”, zip line, softball field, and so on), there is a lot of activity at the site beyond the living history function the farm was established to serve. At any rate, it would be surprising if there were no administrative or oversight functions at NPS associated with operation of the site.
“So far, the farm has had to cancel every event this week and is down $15,000 in income in October, their busiest month. If they stay closed, their survival is in jeopardy.”
Yep. It sucks to be furloughed. It causes a lot of pain and waste that could easily have been avoided with a continuing resolution.
Rick closes with some silly stuff about Senator Reid and experimental cancer treatments for children:
Senator Reid, overcoming the opposition of some GOP senators, got a continuing resolution bill through the Senate that would have funded the cancer treatments for the children, kept the campgrounds open, allowed the colonial farm to keep operating, and kept barriers away from the various monuments in DC, and avoided all the other pain and waste of a shutdown. The GOP House was so eager to provide those services to the people of the United States that they...well, they sent the Senate a ransom note demanding an 11-million increase in the number of people without health insurance in 2014 (per the CBO), higher prices for people buying insurance on the ACA exchanges (per the CBO), and cancellation of the employer contribution toward health insurance coverage for Congressional members and staff.
Posted by: ottnott at October 4, 2013 03:11 AM
If you can make 20% every six months, well, I'll invest in what you're investing.
Posted by: Steven Kopits at October 4, 2013 05:02 AM
First of all, they are no more implausible than shutting down the government over Obamacare.
And if they implausible, it is because
i) economists lack even the most rudimentary consulting skills,
ii) economists are pretty closed-minded as a group, and
iii) because you, personally, do not care a whit about human suffering and economic progress--you would rather perpetuate a dysfunctional system than explore practical ways to make the world a much better place.
All you can propose is a blank posting; I have a solution. One of us is engaged with the topic; the other has abdicated all intellectual and moral responsibility.
Posted by: Steven Kopits at October 4, 2013 05:09 AM
Why are we worried about the assets that the 1%'ers hold? Surely you don't believe in trickle down equities?
Posted by: Anonymous at October 4, 2013 06:14 AM
"A decrease in an equity price index can be interpreted then as a decrease in the expected dividend stream "
You're assuming these people sit and tweak their models every time some tidbit of news comes out? LOL. No, they're just traders trying to game the market in the short term.
Posted by: Anonymous at October 4, 2013 07:02 AM
Until we are ready to throw grandma off the cliff there can be no hope for a sustainable budget.
Posted by: Anonymous at October 4, 2013 07:08 AM
"If you can make 20% every six months, well, I'll invest in what you're investing."
You misread what Menzie wrote. He said 6 months to return to the pre-shock peak.
Posted by: ottnott at October 4, 2013 07:38 AM
What I'm saying is that the market over-reacted to a transient piece of news, and that this was not some long-term dcf type of analysis, but rather moves driven traders and trading programs.
It's the same point Anonymous is making. Clearly anyone who sold into the decline on share prices paid the price. The market had clearly over-reacted.
Posted by: Steven Kopits at October 4, 2013 09:12 AM
You are parroting the legalistic defense the Administration has been giving for their actions but the problem is that it doesn't explain why these privately funded parks were allowed to stay open as normal during previous shutdowns. In particular, if it's really required by law and so clear, why didn't the Clinton administration shut them down in 1995?
It's much worse than that really. The actions on the private parks are just ridiculous but we should focus on the Administration's unprecedented actions with respect to closing federally funded monuments and parks. Look at this newspaper article from the Clinton shutdown. In it, you can see the photo of tourists visiting the Lincoln memorial, but there is a sign on the information booth apologizing that due to the government shutdown, the booth is unstaffed. If you read the article, you can see that people were allowed to visit the Vietnam memorial and climb the steps of the Lincoln memorial. Now look at this photo that shows how the administration has barricaded the Lincoln memorial and is using tax payer funds for a guard to keep tourists away.
This article describes how during the government shutdown in 1995 the WWII memorial in Honolulu was closed. However, tourist buses still arrived and were entertained by WWII veterans giving personal accounts to the tourists. Contrast that with the 80-90 year old members of the Honor Guard, WWII veterans who came to Washington a couple of days ago to visit their WWII memorial, but who were told by the park service it was closed and they would have to leave. However, these feisty gentlemen refused to be cowed and have been visiting anyway. Now comes word that the park service has relented, as described in this article. Apparently, the park service has decided that this particular monument can be visited because it's a first amendment activity.
Well, which is it? Does the law require it be closed since these gentleman are creating unfunded financial obligations for the NPS? What about the risk that one of these gentlemen might fall down and hurt himself. Surely, NPS lawyers have warned about that? Or is it a first amendment activity? And if it is a first amendment activity, why doesn't that apply to every other memorial? And what about the parks? Are there first amendment rights in these cases? If closing all of them is a legal requirement and the Administration's hands are tied, then why didn't the Clinton administration do the same thing?
Questions and more questions. But the answer is obvious. The Clinton administration followed the law and didn't make up phony-baloney legalistic excuses in order to gain a political advantage over Newt Gingrich.
The question to Harry Reid was simple. We can agree to disagree about the spending in general but surely we can agree to let sick children get their cancer medicine, right? Harry Reid's callous answer, with which you apparently agree, is to equate these children's problems to the problems of furloughed government workers. Reid is willing to throw the kids under the bus because the Administration's strategy is to make the shutdown as painful as possible, regardless of the law or ethics. They know that if they give in on anything it's a slippery slope and their strategy might fail.
Posted by: Rick Stryker at October 4, 2013 09:50 AM
Obama is so incompetent that even his attempt to talk down the markets failed.
Posted by: Patrick R. Sullivan at October 4, 2013 09:51 AM
why are you soooooo concerned about shutting down the parks? what about all the other items that are not open?
simple solution. pass a clean CR and a clean debt limit. problem is solved. AND i guarantee you the bills will pass in a bipartisan fashion. solution solved from both sides of the aisle. not complicated at all. why would you not take this path? unless you are an ideologue.
not only do you strike out with every at bat, you should be banned for using PED's!
Posted by: stryker is baffling at October 4, 2013 11:02 AM
Rick tells me:
“You are parroting the legalistic defense the Administration has been giving”
Your aversion to a legalistic defense in response to your assertion that the closings were illegal is duly noted.
Rick complains that the legalistic defense:
“doesn't explain why these privately funded parks were allowed to stay open as normal during previous shutdowns. In particular, if it's really required by law and so clear, why didn't the Clinton administration shut them down in 1995?”
Well, you won't be pleased to hear that, legally, what the Clinton administration did in 1995 has zero bearing on whether or not the current closings are legal. Please don't jump to the conclusion that I'm just digging at your aversion to annoy you. My tendency to rely so heavily on legalistic responses to questions of legality predate this discussion.
Rick, noting that NPS is now allowing veterans access to the WWII memorial as a first amendment activity, asks:
“Well, which is it? Does the law require it be closed since these gentleman are creating unfunded financial obligations for the NPS?
I don't believe the First Amendment explanation. It appears to me that, with all the attention to the memporial closure and the appearance of hotheads at the memorial, the NPS now finds that it is easier to protect persons and property by allowing some access than by closing the memorial.
Rick then asks and answers why the Obama administration is not duplicating the Clinton administration's closure practices:
“But the answer is obvious. The Clinton administration followed the law and didn't make up phony-baloney legalistic excuses”
Warning: your implication that the Obama administration is not following the law has triggered a legalistic response. Neither Clinton's closure policies nor the legality of those policies are relevant to the legality of Obama's policies. Furthermore, the difference between the policies of the two administrations does not show that the policies fell on different sides of the legal line.
If you want to support a claim that what the Obama administration has done is illegal, you have to stay with us here in 2013, focus on the relevant legal codes (especially the Antideficiency Act and 36 CFR 1.5), and indicate why you think the closures violate legal code.
You got off to a bad start yesterday by wondering where the emergency was that allowed the closures without prior notice and explanation in the Federal Register. You remain off track today when you base your accusations on the fact that the policies of the Clinton administration a couple decades back differed from the policies of today's administration.
Posted by: ottnott at October 4, 2013 12:38 PM
ottnott, well said. or in a short sentence, you could state rick stryker just wants to complain about the obama administration no matter the outcome :)
Posted by: stryker is baffling at October 4, 2013 02:04 PM
Does anyone remember what happened to the Lincoln Memorial during this summer's furlough? The Park Service was overstretched because of the administrative furloughs and as a result the Lincoln Memorial was vandalized. So why are people surprised that the memorials and monuments on the Mall are closed?
Posted by: 2slugbaits at October 4, 2013 02:51 PM
The administration has already conceded my main point by allowing the Navy Air Force football game to go ahead, since the game will be played using private funds. Yes, I agree: If an activity is privately funded but on federally owned lands, it should be allowed to continue. Given that, there is no justification for closing parks or concessions that also rely on private funds. During a shutdown, the antideficiency act allows law enforcement and protection of federal property to continue. Thus, the forest service will still enforce the law and put out forest fires. The capitol police will still enforce the law. There is no argument you can make justifying the closing of privately funded parks that you cannot also make against the Army Air Force game, or the Marine Corps marathon, which is also slated to take place because the staff will be paid with private funds. And yet I just read that the park police sent a police cruiser to sit in front of the Pisgah Inn on the Blue Ridge Parkway and turn guests away from the inn and restaurant. The inn and restaurant are completely privately run, but lease the building from the government.
The administration is damaging private businesses and incurring potential liability. These businesses should sue the government. That's the part that's illegal.
I wasn't trying to argue that the administration's current policies are illegal just because these policies weren't followed in the Clinton administration. Rather, I was showing that there is no legal necessity in what they administration is doing. The antideficiency act has been around for almost 150 years, and if it really required all these closings, we should have seen the same behavior in previous shutdowns. Since we don't, we have to acknowledge that there is discretion in how to interpret the law. The administration is using this discretion to make the shutdown as painful as possible. What they are doing with the monuments and fully federally funded parks, museums, etc. isn't illegal but it sure is underhanded and obnoxious. And, as is typical with this administration, the policy is applied inconsistently to suit their purpose. So they don't cancel major sports events and they find a way to allow visits to the WWII memorial, since both of those could turn out to be publicity nightmares. But they send a park police cruiser to sit in front of a privately run restaurant and inn and turn paying customers away, since it is to their political advantage.
Posted by: Rick Stryker at October 4, 2013 10:23 PM
There are a couple of problems with your assertion that administrative furloughs led to the Lincoln memorial being vandalized. First, the Lincoln memorial is open 24 hours but park rangers are on duty until 11:30 PM. The memorial was vandalized after 1 am. So, any furlough wouldn't have mattered. But more importantly, there was no furlough. The park police announced there would be no more furloughs in June but the memorial was vandalized in July.
Nice try. But there really is no justification for putting barricades around the memorial. There is a guard there now. No reason people they can't allow people to walk up.
Posted by: Rick Stryker at October 4, 2013 10:30 PM
Stryker is baffling,
I'm not looking to complain about the administration all the time. There is good news sometimes too. All this hullabaloo to get a 1-year delay in Obamacare may be unecessary. For example, according to this Washington Post article:
Meanwhile, interviews with health insurers, industry consultants, nonprofit groups and people trying to sign up for coverage suggested that the number was very low. Some companies that are offering plans on the federal site said Wednesday that no one had signed up with them.
“Very, very few people that we’re aware of have enrolled in the federal exchange,” said one insurance industry official, who like many in the industry, spoke on the condition of anonymity out of concern for possibly offending the Obama administration. “We are talking single digits.”
Posted by: Rick Stryker at October 4, 2013 10:44 PM
Rick Stryker The Park Service was able to reprogram dollars in order to end the furlough in early June, but in order to do this the Park Service had to reduce coverage overall. For example, under both the furlough and sequester rules overtime and "comp time" are not allowed. So coverage gets thinned and spread out; furthermore, there was next to no summer hiring. [One of my brothers was a summer hire ranger back when he was in college.]
During the post-9/11 summer tourist season the Mall area normally gets 24 hour coverage. Park "interpreters" are not there 24/7, but normally guards are. I live 6 blocks from a national park. The park closes in the evening, but the Park Service guards are protecting the physical buildings 24/7...except when there's a furlough or sequester.
Opening the Mall would have been irresponsible unless you believe that the rangers and guards are non-value added, which I don't believe. They protect against vandalism and they also provide first responder assistance. Have you ever been to the WWII Memorial? Lots of slippery steps and pools.
As to the healthcare exchanges, I don't think anyone expected people to actually sign up immediately. Selecting a healthcare plan is a big deal and a lot of people are "window shopping" and comparing plans. What was surprising (but probably shouldn't have been) was the number of window shoppers.
One thing to worry about is that we end up with another red state/blue state break. If you live in the half of the states that resisted the ACA, then the health exchanges may be a big flop; but if you live in a state that embraced the exchanges and accepted the Medicaid subsidy, then the exchanges will be a big success. I wonder how long it will be before people in many of those non-participating states realize that they are effectively subsidizing the states that do have the exchanges.
Posted by: 2slugbaits at October 5, 2013 09:35 AM
The Budget Control Act of 2011 was signed into law on August 2nd around 1PM right after the Senate passed the bill. This ended the debt ceiling crisis. The movement of the Dow after Senate passage is not relevant, since the debt-ceiling-as-a-cause was now off the table. The operative top in the Dow was on July 7th. It was less than 100 points below the high earlier in the year, and is clearly the starting date of the market’s worry about the debt ceiling. The Dow dropped 587 points from this top to the close on August 1st. The big drop in the Dow on August 2nd came in spite of House passage the night before, and Senate passage that day with the president signing the bill hours before the market’s close. The 266 point drop that day was impelled from the opening gun by the European bank stock index being down big in European trading. And by a surprisingly weak personal income report out that morning.
Over this span of 18 trading days, two factors beside the debt ceiling played an important role in the drop of the Dow. These were the flow of economic reports and the ramping up of the euro crisis. There were only six big down days in the Dow during this stretch. Two were primarily due to news out of Europe. The remaining big down days due to the debt ceiling stalemate tallied 475 points of Dow drop. But the Dow went the other way on days when resolution seemed hopeful. Conservatively, no more than 400 points of total drop in the Dow from the peak in July to the morning of August 2 were because of the debt ceiling. In a relative sense, this is chump change. The graphic in the post demarking a 15 to 20% drop in the S&P is crude, misleading, and shows no understanding of day-to-day causation.
Sadly, a fair amount of empirical economic analysis fails in precisely this manner. Everything in economics is context dependent. And it is rich and complex in causality at the detailed level.
Posted by: JBH at October 5, 2013 11:55 AM
Entirely missing in this post is any evidence that what happens to equity markets has a significant impact on the real-world economy.
We know as a matter of practical fact that a vast disconnect exists twixt the equity markets and the real-world economy. Equity markets have soared since 2009, yet the real economy remains miserable for the bottom 80% of the population.
This post seems like a classic example of a poorly-thought-out evidence-free argument.
Posted by: mclaren at October 5, 2013 12:48 PM
mclaren: Maybe I should delete this post on q-theory. Or maybe not.
Posted by: Menzie Chinn at October 5, 2013 01:03 PM
rick stryker said:
"I'm not looking to complain about the administration all the time."
you are either shameless or delusional. i guess i can let you make the call. either way, you gave me a chuckle as swung and miss on all three pitches! you really should learn how to play ball better if you want to be in the big leagues!
Posted by: stryker is baffling at October 7, 2013 07:48 AM
I think that Obama should say sales of the US stock of gold will commence on Oct 17th to cover US obligations, and they will continue as needed until we run out of gold or until further debt has been authorized by Congress.
Goldbugs are the heart of the Tea Party; they would scream to thier Congressmen and the debt ceiling would be rased. That way they would not profit from destroying the economy.
Posted by: Kathleen at October 7, 2013 11:38 AM
I read Menzie's post here as an example of an event study. Based on some of the critical comments here, I thought it would be a public service to provide this link to how some define event studies:
Posted by: pgl at October 8, 2013 06:26 AM