So I got back to the nation's capital just as Congress was passing the last-minute legislation to avoid an October 1 government shutdown, which I'd discussed two posts ago (http://tiny.cc/…). Cue the sound of one hand clapping.
The other hand refuses to join in the applause for this exercise. Three reasons:
-- It's another kick-the-can-down-the-road maneuver. Nothing was resolved. The date of the shutdown was just moved back to December 11.
-- It only got done because John Boehner announced he's stepping down as Speaker at the end of October. Agree with Boehner on the issues or not, he understood that with Democrats holding the presidency and enough Senate seats to tie that body up, House Republicans would be unable to turn their wildest dreams into reality. He couldn't always convince the "stand on principle" contingent among House Republicans to compromise, but at least his instincts were to make laws, not statements. Boehner's successor won't likely be as pragmatic.
-- It doesn't even begin to address the real budgetary issues. As Greg Ip pointed out in the Wall Street Journal (http://tiny.cc/…), they relate to the composition of federal spending more than the amount. With baby boomers flooding into their Medicare years in the decade ahead, entitlement spending will devour tax revenue the way Cookie Monster gobbles macaroons and brownies. As interest rates rise -- and they will someday -- interest payments on Uncle Sam's snowballing debt will eat any remaining chocolate chips.
Neither party is addressing these problems. Instead, some Republicans are pushing increased outlays for the military and some Democrats are urging more domestic spending.
Farmers can be thankful that along with the kick-the-can continuing resolution, Congress and the president reauthorized the U.S. Grain Standards Act. As a result, grain exports are less likely to be held up by labor disputes at the ports for the next five years the way they were earlier this year. Mandatory reporting of livestock prices was also reauthorized.
But with Washington ducking the tough issues, pressure on the federal deficit and debt will continue to build in the years ahead. As it does, the outlook for another farm bill when the current one expires four years hence looks increasingly murky.
And in the shorter run, a government shutdown December 11 could have an especially nasty effect on markets. It would come at around the same time as what is likely to be an increase in interest rates by the Federal Reserve and another bitter fiscal debate in Congress, this one over raising the debt ceiling. A coincidence of these three events would be a recipe for a healthy helping of market volatility.
And Boehner won't be around to solve the problem by resigning as speaker again.
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