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The Dow is Down 114.06 to 15,144, the S&P is Poorer by 10.35 to 1,681, and the NASDAQ has Descended by 16.19 to 3,765. Apparently, the market is reacting to the looming potential for a shutdown of the U.S. Government.
The problem is that barely anyone I talk to understands what a government shutdown means. The media is exacerbating the matter by focusing almost exclusively on assigning blame instead of reporting the larger story or explaining what the shutdown does and does not mean. Ergo, the general public does not understand, retail investors don’t understand, and their is a general air of panic across the U.S.
You’d think that folks would remember last year. Or the year before. Or the 17 times in the last 35 years or so that the House of Representatives and the Senate have been at odds over this matter. President Obama is making political hay of the standoff, pointing the spotlight on Congress , which Americans tend to think of as the House and, therefore, the Republicans. The silver-tongued devil in the White House has managed to turn the turmoil into a scenario where he laments to the American public that it is impossible to control the Republican. He’s talking about the Republicans who have been trying since the beginning of Obama’s first administration to cut government spending. The House has passed a budget, as it is required to do, but the Democrat-controlled Senate cannot – or will not – approve the budget or draft one of its own.
When the Republicans passed a bill to the Senate that defunded Obamacare, they knew that the Senate would reject it, because the president – and his Democratic Party – want to have the legacy of a national healthcare plan, even if it bankrupts millions of American citizens and thousands of American small businesses. When the bill was returned to the House, the leaders sent a second draft, which delayed funding of Obamacare for one year, thus leaving money available to fund the government. This bill was passed with a bipartisan majority. Now we wait for the Senate . . . and for midnight.
So, what will happen if the U.S. Government “shuts down?” Not much, really, when you look at the big picture. Non-essential government employees would be furloughed and non-essential services would be discontinued. The mail would still be delivered. Social Security payments would still be made. National Parks would close. Presidential parties and travel would continue regardless of how non-essential they are. You can rest assured that the first family will not have to change to a diet of peanut butter sandwiches.
The odd thing to me is that almost no one is talking about the real crisis that is approaching – the need to increase the U.S.’ borrowing power. That will be upon us within the next two to three weeks. Failure of the government to raise the debt ceiling is what will throw the economy and the stock market into a turmoil. It is at that point, that the U.S. will not be able to pay its bills. Now that is something that ought to gives investors, and all Americans, some real heartburn.
