Baum on Money: Congressional Ping Pong

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Good morning, dear readers. It's T minus 1 and counting for the debt ceiling. Deals to raise the limit come and go so quickly that any update on the latest twists and turns may be old before it hits your screen. Here goes.

It's back to the Senate

If this sounds a lot like yesterday's update, it is. House Speaker John Boehner couldn't muster the votes for a deal to raise the debt ceiling because various factions of his party opposed the cuts in health care subsidies for congressional aides, the repeal of the medical device tax, or the omission of anything to restrain Obamacare. So now it's back to Harry Reid and Mitch McConnell in the Senate. Senate procedure could delay a vote on a bill until next week. If there is an eleventh hour compromise to be had, please don't wait until 11:59 p.m. this evening.

Fitch fires a shot across the bow

Political brinkmanship isn't playing well with the credit ratings companies. Late yesterday, Fitch Ratings put the U.S.'s "AAA" on credit-watch negative, citing the failure to raise the debt ceiling in a timely manner. Standard & Poor's downgraded the U.S. to AA+ in 2011 following the debt-limit showdown. In a report last month, S&P said that sort of political brinkmanship "is the dominant reason the rating is no longer AAA." The budget deficit has improved since then, but the partisan rancor had gotten worse. Fitch, S&P and Moody's all expect the Treasury to prioritize payments and pay bondholders first if Congress fails to raise the debt ceiling.

No CPI is more than a missed data release

September is the end of the government's fiscal year. Once the final numbers are in, it can make annual cost-of-living adjustments for things like Social Security payments or long-term disability contracts. Without September's consumer price index, there can be no annual adjustments. (The Social Security adjustment doesn't actually take effect until January.) What about the Treasury, which uses the CPI to adjust the principal and interest rates on inflation-indexed bonds? Absent the September CPI, "Treasury will be forced to generate its own data," according to the Wall Street Journal. "The figure will be based on the last available 12-month change in CPI, which was 1.5 percent, according to Treasury's auction regulations." Boy, they think of everything.

Life imitates art

It's like something out of Dickensian London, with women selling hair, breast milk and eggs (their own) to make ends meet. Unemployed for years, some people are resorting to selling body parts to survive, according to Bloomberg's Victoria Stilwell. As far as organs go, kidneys are a no-no, with trading limited to the black market. Leave it to University of Chicago economist Gary Becker to come up with the idea of using monetary incentives to encourage organ donations (or does that make them sales?).

How low can it go?
Consumer confidence is falling by leaps and bounds, according to Gallup. A 17-point decline in the last two weeks, coinciding with the government shutdown, takes the index to -39, the lowest since late 2011, when confidence was still recovering from the summer debt-ceiling debacle. Consumer expectations are taking a bigger hit than their assessment of current conditions. "Americans are more pessimistic about the direction in which the economy is headed than about its current health, a departure from what has been the case during nearly all of 2013," Gallup reports. If the trend persists, economists will start adjusting their forecasts for consumer spending and GDP growth accordingly.

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