Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Fiscal Policy"

Shadow of the Sequester

by Robert Kahn
House Budget Committee member Marsha Blackburn (R-TN) displays a copy of President Obama's FY14 budget proposal upon its arrival on Capitol Hill in Washington. (Courtesy Kevin Lamarque\Reuters). House Budget Committee member Marsha Blackburn (R-TN) displays a copy of President Obama's FY14 budget proposal upon its arrival on Capitol Hill in Washington. (Courtesy Kevin Lamarque\Reuters).

The news shows this weekend were filled with optimism from across the political spectrum that the congressional budget conference, which begins Wednesday, will produce a deal. I am skeptical. The aim of the conference will be to find agreement on spending for the remainder of FY14 at levels of spending above those that resulted from the 2011 Budget Control Act and the failure of the “super committee” (enforced by sequestration, or “the sequester”). All factions are united in their distaste for the sequester, which cuts too deep and too broadly across both defense and domestic areas. But there is little consensus on what to do about it, and no ideas about how to bridge the fundamental divide between Democratic calls for more revenue and Republican insistence that the focus be on entitlement reform. At this point, the most likely scenario is that a deal on spending will come in January, not December, and will be at (or very near) sequester levels of spending.

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When Is the Next X Date?

by Robert Kahn
Source: fms.treas.gov Source: fms.treas.gov

In my post yesterday, I mentioned in passing the uncertainty about when we would again hit the debt limit (“X Date”).  The question is complicated. Yesterday’s agreement extends the debt limit until February 7, and it allows the U.S. government to replenish or repay the extraordinary measures that it took in order to finance the deficit from May until yesterday.

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Celebrating Failure

by Robert Kahn
(Joshua Roberts/Courtesy Reuters). (Joshua Roberts/Courtesy Reuters).

So it looks as if we will have a fiscal deal. The final bill will be the result of the Senate negotiations that concluded this morning:

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No Clear Fiscal Deadline, and That’s a Problem

by Robert Kahn

It now looks likely that the U.S. government will remain shut down until an agreement is reached on the debt ceiling, and that could take several more weeks.  Markets are starting to worry—global equities are lower, commodities and other growth-sensitive assets are down, and the dollar is weaker.  But market moves so far have been moderate, hardly suggesting panic.  The usual interpretation: markets are confident of a deal before the deadline.  But when is the deadline?  Turns out, it’s uncertain and it’s endogenous, depending importantly on how markets react in coming days.

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The Government Shutdown: How This Ends?

by Robert Kahn

It’s day one, and there is agreement that we don’t know where we are headed or how we get there.  Both sides are playing a long game and seem unified in their brinkmanship.  If current market and political realities are any indicator, we’re a long way off from there being enough pressure on either side to deal.  Indeed, as my colleague Ted Alden emphasizes, the areas of government hit the hardest by the shutdown don’t provide services that the hardliners value, making compromise more difficult.  This could go on for a while (the on-line betting odds look about even for the shutdown to go more than 7 days), but when we do get to making a deal, here is one idea on the way forward.

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Fiscal Fiasco—This Time Is Different?

by Robert Kahn

It now looks like the government will shut down this evening.   The Senate is likely to make one more effort to pass a clean continuing resolution (CR), but at this stage the Republican House seems unwilling to let go of its animus for Obamacare.  Perhaps they will settle for something symbolic–one idea is for Congress to forgo their insurance and go onto an exchange as part of the CR—but there is no evidence that discussions along these lines are taking place.

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