Kicking the Can Down the Road: U.S. Congress Passes Stop Gap
Funding Bill for 45 Days
By the
Curmudgeon with Victor Sperandeo
Executive Summary:
Congress narrowly averted a U.S. government shutdown on
Saturday as the House, in a stunning turnabout, approved a stopgap funding bill
to keep the federal government open until mid-November. After Senate passage,
President Biden signed the bill shortly before midnight. It included $16 billion in disaster relief
funds, an extension of a federal flood insurance program, FAA reauthorization,
but no aid for Ukraine.
The American people can breathe a sigh of relief: there will
be no government shutdown, said Senator Chuck Schumer, Democrat of New York,
and the majority leader, after the Senate vote closed about three hours before
the deadline. After trying to take our government hostage, MAGA Republicans
won nothing.
The bipartisan votes came after House Speaker Kevin McCarthy
repeatedly tried to craft legislation that would attract enough House Republicans
to pass the bill without Democrats by slashing spending. That didnt happen. To date, Congress has approved about $113
billion in aid to Ukraine, according to calculations by the US State Department
Office of Inspector General and the Committee for a Responsible Federal Budget.
Democrats wanted to include $6.2 billion in military aid to
Ukraine, but that was blocked by Republicans.
Hard-right Republicans refused to support the stopgap bill,
known as a continuing resolution, because it essentially maintained funding at
levels set when Congress was under Democratic control last year.
In a statement after Senate passage of the bill, President
Biden called it good news for the American people. I fully expect the speaker
will keep his commitment to the people of Ukraine and secure passage of the
support needed to help Ukraine at this critical moment.
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..
Curmudgeon Comments:
Like the bill that lifted the U.S. debt ceiling with no limit
till 2025, this stop gap/continuing resolution is yet another Congressional
failure to be fiscally responsible.
Rep. Wesley Hunt said we cannot continue to kick this can
down the road after the House passed the extension.
Moodys said this past week that the budget fight in Congress
shows the weakness of U.S. institutional and governance strength relative to
other Aaa-rated sovereigns, echoing sentiments of
the other major rating firms, Standard & Poors, and Fitch, which already
have stripped the U.S. of its previous top AAA grade debt rating.
Given the sharp rise in the U.S. federal debt and budget
deficit relative to GDP (see chart below), we are entering a new fiscal
regime, wrote Bank of America global economist Claudio Irigoyen. The total amount of federal debt is now 120%
of GDP, according to the U.S. Office of Management and Budget.
Adjusted for the effect of student loans, the budget deficit
is projected to double roughly to 7.5% of GDP. About 2.5 percentage points
correspond to interest expense, which will comprise 15% of U.S. federal
revenues, Irigoyen calculates. And that
percentage will increase if the Fed keeps interest rates higher for longer.
The U.S. deficit is simply too large for an economy at full
employment and would call for fiscal tightening, he added. Along with soaring
U.S. Treasury interest costs, two-thirds of spending is mandatory and will keep
growing due to demographic trends.
While the Fed and its regional banks previously sent net
profits to the U.S. Treasury which decreased the budget deficit, that has not
occurred this year. As of September 28th,
the Feds 2023 YTD deferred asset
losses are -$54,314 billion with -$100,337 billion of deferred assets from Fed
Regional banks.
No private company that we know of has ever lost $155
billion as the Fed and its regional banks have done. And the losses will
increase into 2024 with the Fed keeping rates higher for longer.
.
..
Victors Comments:
Although the U.S. government didnt shut down, House Speaker
McCarthy looks like he may be thrown out of his leadership position. Matt Gaetz, Republican House representative
from Florida, was outraged. He
reiterated on Sunday that he would try to remove Mr. McCarthy from his post,
because he made a hidden deal with the Democrats.
since the start of Julyan interview on CNNs State of the
Union, promising in the next few days to bring up a measure called a motion
to vacate, which prompts a snap vote on whether to keep the speaker in his
post. I think we need to move on with new leadership that can be trustworthy.
The war in the Ukraine is causing a huge split in Congress
and the Republican Party. The Senate is
in favor of giving money and military equipment to Kyiv, while the House is not
wanting more money for this effort.
The U.S. seems to be in its own private political war, while
cool heads should be the goal. Its a real mess!
The U.S. bond market, the most liquid in the world, is in a
long and serious decline. For example,
the TLT ETF (20+ year U.S. bond) market price is down -42.54% from its high.
Bonds are now in big trouble. Thats due to an increasing
supply of U.S. debt, Fed QT replacing QE, decreasing foreign central bank purchases,
and rising Oil prices. Brent Crude, the international oil benchmark is up 30% since the start of July.
End Quote:
We now live in a nation where doctors destroy health,
lawyers destroy justice, universities destroy knowledge, governments destroy
freedom, the press destroys information, religion destroys morals, and our
banks destroy the economy.
By Chris Hedges, American journalist, author, commentator,
and Presbyterian minister.
.
.
Be well, success, good luck and till next time
The Curmudgeon
ajwdct@gmail.com
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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