The federal government shutdown showdown of 2019 between Capitol Hill Democrats and President Donald Trump keeps setting records as it enters into its 26th day.
The previous longest federal shutdown in U.S. history was the 1995-’96 face-off between Speaker Newt Gingrich (leading the first Republican House Majority in 40 years) and President Bill Clinton.
That shutdown lasted into the 21st day, and it may not be a coincidence that this happened just as 24-hour news coverage on cable TV had reached a critical mass.
A theory: The spectacle and the drama of federal government shutdowns, with the resulting publicity, impels the political-media complex to these antagonisms and resolutions.
The problem for the federal government is this newly disruptive level of budgetary brinksmanship diminishes its credibility and creates instability in the economy.
The State of the Shutdown
The current, nearly month-long government shutdown is over $5.7 billion in federal funding to build more barriers on the border of the United States and Mexico.
Donald Trump won’t sign the next appropriations bill without it, and House Speaker Nancy Pelosi won’t send him the $5.7 billion for his border wall. It’s interesting he didn’t get the funding when Republicans were in control of both Houses of Congress for his first two years as president.
It’s not like for instance, Barack Obama’s $787 billion appropriation for a federal “stimulus package” (The American Recovery and Reinvestment Act of 2009), which was passed without a single Republican vote in the U.S. House. Or “Obamacare” (The Patient Protection and Affordable Care Act of 2010) which was passed the following year without a Republican vote.
Those were comparatively massive appropriations written into law by starkly partisan majorities. Republicans have been resistant to building more border fencing, but Donald Trump may have had better luck forcing a shutdown over it with Paul Ryan a year ago.
JP Morgan Chase CEO Jamie Dimon Warns Shutdown Could Hurt The Economy
As the shutdown entered its fourth week, JP Morgan Chase CEO Jamie Dimon warned Tuesday that U.S. economic growth could halt altogether if the shutdown continues for very long:
Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero.
But Jamie Dimon is not the only Wall Street financier who’s worried.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, told clients on Monday that U.S. GDP could fall below zero and show negative growth if the shutdown continues through March.
U.S.-China Trade War Dampens Spirits
An analysis by the Cato Institute in Washington DC estimates that the Trump Administration’s tariffs on Chinese imports amount to a tax burden of $12.5 billion on the U.S. economy, and has a list of 202 U.S. companies that are bearing the brunt of this tax increase.
As a presidential candidate, Donald Trump told a New Hampshire town hall audience: “I like a free economy, I like having a great and free economy.” But there’s no denying that Trump’s tariffs as president are a form of political intervention in the natural operations of a free market economy.
That’s what Republican U.S. Senators started saying about the U.S.-China trade war last July after Washington’s tariffs on steel imports from China provoked retaliatory Chinese tariffs.
Chalk up $12 billion more in damages to the American economy. That’s the amount of the federal farmer relief bill to bail out American farmers who were hurt by China’s tariffs.
This is what prompted Sen. Ron Johnson (R-WI) to say:
This is becoming more and more like a Soviet type of economy here: Commissars deciding who’s going to be granted waivers, commissars in the administration figuring out how they’re going to sprinkle around benefits.
“Taxpayers are going to be asked to initial checks to farmers in lieu of having a trade policy that actually opens and expands more markets. There isn’t anything about this that anybody should like,” said Sen. John Thune of South Dakota, the third-ranking Republican leader in the Senate.
Stock Prices Have Gone Full Bear
In December, the stock market had its worst December since the Great Depression and its worst Christmas Eve trading day ever, leading the S&P 500 into a bear market on Christmas Eve after plummeting more than 20 percent from a previous high.
The market for equities has entered a bear market if there is a drop of 20 percent or more after a recent high, and has often preceded long-term declines in equities markets.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.
Featured Image from AP Photo/ Evan Vucci