Managed Catastrophe

"Danger, Will Robinson. That does not compute." -- Robby the Robot.

   News items: The government is closed, nobody's talking except to blame the other guy, and the approval rating for Congress is down to 5 percent. Considering the margin of error for polling, it's more likely zero; nobody likes what they're (not) doing.
   Meanwhile, the forecast for the economy is "skewed to the downside," according to the Federal Reserve. And that's a phrase from the minutes, released today, of their meeting nearly a month ago, before the shutdown. How much worse can it be now?
   Republicans are claiming it's a "managed catastrophe," whatever that is, and denying that the government will run out of money next week. There's plenty of revenue coming in, they say, for the government to pay the interest on its bonds, etc., while "negotiations" take place to resolve disagreements over the budget, the debt ceiling and the new health care law.
   However, there apparently wasn't enough money to pay promised death benefits to the families of military personnel killed in the line of duty. There wasn't enough money to keep national parks open. There wasn't enough money to keep scientific research agencies functioning. There's isn't enough money to keep social service agencies working to help Americans in need.
   But there's plenty of money to keep Congressional salaries flowing.

   As for people out of work and unable to pay their bills, five federal regulatory agencies are urging banks to be lenient with customers affected by the shutdown.

   And news media are finally getting to the story that an American government shutdown will, in fact, affect other economies and nations. When the world's largest economy hiccups, it's bound to affect others. How could it not?
   Add this to the story: The Pentagon says military aid to Egypt will be cut. The given reason is the failure of the Cairo leaders to bring peace to that country. It's also true that with no budget in place and revenue dropping, the U.S. is running out of money. And if Washington is running out of money to keep its own operations running, it follows that it's running out of money to help others. So as the money flow stops, other economies also face a downturn.
   Result: A worldwide crash.

   "Failure to lift the debt ceiling would ... be a major event. Prolonged failure would lead to an extreme fiscal consolidation and almost surely derail the U.S. recovery." That from Olivier Blanchard, Economic Counsellor and Director of the Research Department at the International Monetary Fund. Moreover, Blanchard added, "The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets both in the United States and abroad."

   As for managing a catastrophe, that's a non sequitur. At best, it doesn't follow, and at worst, it's dumb.

   Let's hope Congress gets its act together.