Last month I wrote to you about the downside of the 24/7 news cycle, where everything is played to be a crisis demanding our constant and on-edge attention. There is a sense of déjà vu as we come to the end of this month with another crisis, another ‘dire’ financial situation. As I write to you, the government has ‘shut down’ and the debt ceiling looms.
This is not to make light of the current situation. The airing of our internal national dysfunction does nothing for our stature abroad, and instills no measure of confidence that the leaders that brought us to this point can find their way out. Yet, the market hasn’t panicked. The market has been very measured in its response. As the shrill voices raised in argument become ever more shrill, the market continues to be cautious.
Economist Brian Wesbury looked at past government shutdowns. There were 19 of them between 1976 and 1996, with no economic collapse. And the government being ‘shut down’ is really pretty relative. The military continues to serve, border control remains in place, schools are in session, air traffic continues to move, Social Security payments are made and the Treasury continues to take in funds. It is a hardship on the furloughed workers, no question, but it is not a crisis in the economy.
The debt ceiling situation, on the other hand, is a bit different. There has not been a time when the debt ceiling has not been raised to accommodate the spending Congress has authorized. Let’s be very clear on this. The debt ceiling is the limit set by Congress on the amount of debt the U.S. can carry. Raising the limit allows the Treasury to borrow to cover the bills and obligations incurred. The bills and obligations already have been approved by Congress.
Winston Churchill famously remarked, “You can always count on Americans to do the right thing – after they’ve tried everything else.” I am young enough to believe that this is still the case – that even with the rancor and biliousness currently in evidence, our elected officials will eventually do the right thing and come to an agreement. Maybe they can heed another word from Churchill: “Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.”
The next several days will be full of news and opinion and pundits working hard to instill fear. As always, you can count on CTC to be watchful, mindful, rigorous in research and prudent in action.
Ann P. Wiesbrock, CFP®