Days of Whine and Poseurs

   The economic recovery is muddling, the nation's fiscal year has started with no final budget in place, and the U.S. Treasury is about to run out of cash.
   Result: Government payments -- including  retirement and health benefits, among other things -- will stop in mid-November, lack of a budget will shut down the government in mid-December, and a hesitant economy will stumble and fall, if not crash entirely.
   Or, as a Republican President once said, "We're in deep doo-doo."
   Consider these elements of a coming crisis:
-- Congress failed to approve a new federal budget as the new fiscal year began October 1, and instead passed a temporary measure to keep the government operating until mid-December.
-- The Congressional Budget Office said the Treasury's cash balance will be depleted by mid-November unless the debt ceiling is raised, thus enabling it to issue more securities, borrowing additional cash. Otherwise, there will be payment delays, "a default on the government's debt obligations, or both."
-- The Federal Reserve Board's survey of conditions nationwide noted "modest expansion" in economic activity from mid-August through early October, manufacturing "turned in a mixed but generally weaker performance" with some districts "noting adverse effects from the energy sector." However, the Fed noted in its Beige Book summary report, "manufacturing conditions were generally sluggish." In addition, wage growth was subdued, despite some reports of labor shortages. Prices were "contained," the Fed noted, which would mean little inflation. That's a sort of good news, knowing that prices are not rising faster than wages. That's no consolation, however, to those without a job.
   And for those receiving pension benefits, there's a potential halt to those payments. The Treasury typically forwards money to trust funds that administer programs like the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund on June 30 and December 31. In the past year, the CBO noted, "payments due on each of those dates has amounted to about $70 billion." But because of a continuing impasse over the debt ceiling, those payments were not made last June, CBO said. And unless the ceiling is lifted again, no payments to these programs will be made in December.
   Also in danger will be funding for other government-sponsored benefits programs, such as Social Security retirement benefits, military retiree payments as well as current salaries for the military and other government employees. If the Treasury runs out of cash and is unable to meet its financial obligations, the threat of a government shutdown becomes increasingly real, and could well happen just as the holiday season begins.
   Can the crisis be stopped? Yes, but only if a recalcitrant Congress passes a permanent budget and raises the debt ceiling, enabling the government to pay its bills.
   Otherwise, the government must close up shop (again), leaving millions out of work, security and transportation networks without safety supervision, health and pension benefits suspended, and a general economic decline, if not disaster.
   Who can avert the crisis? Congress. Will it? One can only hope. Brinksmanship has failed in the past, as political radicals in Congress try to blame everything on the Administration for its own failure to act.

   Happy Holidays.