Baum on Money: Restart the Clock
Good morning, and a good one it is because a deal to reopen the government and raise the debt ceiling is signed, sealed and delivered. On to your morning reading menu.
It's a done deal
An agreement to reopen the government and raise the debt ceiling passed both the Senate and House by overwhelming majorities. The Wall Street Journal provides the details: "The House voted 285-144 to reopen the government through Jan. 15, suspend the debt ceiling through Feb. 7 and lay the groundwork for talks over broader budget issues. The Senate earlier approved the bill 81-18. President Barack Obama signed the bill early Thursday morning." Perhaps you are wondering why it took so long, and so many incarnations, to reach what is a pretty straight-forward agreement that has few strings attached. If you answered, "because the deadline was near," you would be correct. Which is why most folks have low expectations for the new conference committee, assigned with finding a long-term fiscal solution, by December.
Zombies still in the House
Round one in the budget battle goes to President Barack Obama, but just because the government will reopen and the Treasury can borrow -- both for a short period of time -- doesn't mean the end is in sight, says Reuters' Felix Salmon. "Zombies have taken over a large chunk of the Capitol, and there’s no particular reason to believe that they’re going away any time soon," he writes. "We will have more sequesters, and more shutdowns, and more debt-ceiling fights, and eventually, in a statistical inevitability, we will fail to find some kind of way through the mess." You can't accuse the public of having unrealistic expectations.
Housing seems to have survived the shutdown
The National Association of Homebuilders released its Housing Market Index for October yesterday, an important metric for an important sector of the economy and a welcome input for data-starved markets. The HMI fell 2 points to 55, which is down from an 8-year high of 58 in August. The builders' group said the dip was a result of "the cost and availability of labor and lots and uncertainty in Washington." I'm assuming "availability" refers to "lots," not "labor," since the housing bust left a surfeit of unemployed construction workers. Higher mortgage rates? Not a big deal, according to the NAHB.
Leaning toward the supply side
Economist David Beckworth has a new blog post titled, "My Supply-Side Senses Are Starting to Tingle." He's referring to that burning question, at least in economic circles, of what's inhibiting employment growth: a lack of aggregate demand or negative supply shocks. Beckworth had been siding with the weak-demand argument but noticed that small businesses are starting to point to regulation -- a supply side deterrent -- as their No. 1 problem. (He's using data from the National Federation of Independent Business monthly survey.) The NFIB and other surveys suggest Obamacare is the reason, even though most of the increase in part-time workers to date has been voluntary, according to the Labor Department. Investors' Business Daily is keeping a scorecard of job actions tied to Obamacare.
Been there, done that
The countdown to the next showdown has begun. Fast forward to January 2014, and the federal government has just shut down because of Congress' failure to pass appropriation bills. The Urban Institute's Gene Steuerle writes the fantasy script, complete with Paul Krugman urging the government to take advantage of rock-bottom interest rates to borrow all it can. With everyone expecting another shutdown showdown, any outcome can't help but exceed expectations.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)