D.C. Stalemate Imperils Social Security Payments
NEW YORK ( TheStreet) -- The reduction in spending caused by the federal government shutdown may not have a major effect on the U.S. gross domestic product, but the unresolved federal debt ceiling debate could make it impossible for the U.S. Treasury to make Social Security payments for November.
The shutdown on Tuesday caused the furlough of 800,000 federal workers. Credit Suisse economist Andrew Garthwaite in client note on Wednesday estimated that "even a 22 day shutdown (as under Clinton) would take only around 0.2% off GDP." That is, of course good news, as is the timing of the shutdown at the beginning of the fourth quarter. There's still plenty of time for federal agencies to make up for delayed spending before the end of the year.
There's also hope that the shutdown may not last very long, as "polls show that the Republicans are getting a disproportionate amount of the blame for the shutdown," according to Garthwaite.
The shutdown will cause great inconvenience to many businesses, some of which may not have been anticipated by investors. For example, Jet Blue
The shutdown can even threaten consumer safety, according to Cars.com, as the National Highway Traffic Safety Administration said on Tuesday that because of a lack of funding, the agency "is unable to post any new recalls after close of business September 30, 2013." Consumers can still search for auto recall information on the agency's Web site , but new safety complaints cannot be processed until he government shutdown ends.
The Debt Ceiling Looms
While the shutdown dominates headlines, the upcoming showdown in Congress over the debt ceiling is far more dangerous and could delay Social Security payments scheduled for Nov. 1.
Last Wednesday, as lawmakers sought a last-minute deal to keep the entire federal government operating, Treasury Secretary Jack Lew in a letter to Speaker of the House John Boehner (R., Ohio) said the "extraordinary measures" the Treasury was taking to maintain its borrowing power will "be exhausted no later than Oct. 17," unless the $16.7 trillion federal debt limit is raised.
Republicans in the House of Representatives may quickly change their minds about how much political damage they are taking from the shutdown and stop attempting to delay the implementation of the Affordable Care Act -- lovingly termed Obamacare -- for one year.
But Republicans have long hung their hats on extracting concessions from Democrats and President Obama every time the U.S. hits its statutory debt limit.