Government Shutdown

For all the media hysteria, you might think a government shutdown is an apocalypse. Everything shuts down except for essential services. But the government thinks everything it does is an essential service, so it doesn’t amount to as much as the media may want you to believe. It’s a very different thing than a debt default, which would send shock waves through the global financial system that could take years to recover from. In my career in the civil service for example, I saw a few government shutdowns from the inside. In our agency, they resulted in no overtime being permitted. There was a hiring freeze. Employees were warned that a paycheck might be late or that they might be furloughed (though none ever were). Aside from that, life went on.

So why the big media scare? The financial media are run by Wall Street. Wall Street thrives on easy money. Anything that might tighten monetary or fiscal policy could result in a recession. But let’s be clear; the recession Wall Street fears is a recession on Wall Street.

It’s abundantly clear from the one sided media reporting. As the Wall Street DEI-ESG network would have it, there is a cadre of “hard line Republicans” threatening to shut down the most important part of the economy. (Apparently there is no such thing as hard line Democrats.) It wants everyone to know who the bad guys are … it is the public duty of all concerned to increase deficit spending without question, and anyone who might tap on the brakes is one of them.

It’s hardly just one party at fault for debt and deficits. Since 2000, each administration, each congress, seems to regard the deficits of the prior one as a challenge to exceed. But in the financial media, government shutdowns are always due to hard-hearted bad guys whose motivations shall remain unexamined.

Even those who warn about the dangers of runaway government debt understate the case, framing the problem as burdening future generations. As if there are no costs in the here and now. But every unit of purchasing power spent by the government comes from somewhere. It’s not manna from heaven. It’s not even just manna from the future.

Any any given moment, there exists a finite body of goods and services available for purchase. This – not the amount of money and credit, nor the level of wages or stock prices, nor consumer spending – determines the total purchasing power in an economy. Goods and services cannot be printed. So if I have a printing press that allows me to increase my purchasing power, someone else must necessarily find their purchasing power diminished. All without my taking a single dollar from them.

That’s why it’s illegal for me to do that.

But not for the government. So if you hope to buy a home, and find that your power to purchase one has been diminished, or if you’re unable to afford a new car, or even struggle to pay the rent or buy groceries, don’t blame me. Connect the dots … though they may follow a tortuous path. Deficits are when the government spends money that it doesn’t collect in direct taxes. But that only means you pay in not-so-direct ways. It may be that the cost of borrowing money has risen. Or that the money itself has lost value. Or both. Either way, even while you may be working harder than ever, your purchasing power seems to be slipping away. It’s understandable if you’re tempted to go on strike. Or frustrated that your Social Security checks or retirement investments have lost purchasing power. Where did it go?

If you pay a visit to the Hamptons, you might see where some of it went. Or the posh suburbs of the District of Columbia, or the elite enclaves of Silicon Valley. Some of it is going to build windmills that cost more to generate less energy, and to make electric cars seem cheaper than they really are. Some of it is going to Ukraine to kill people and break things. Wherever it went, it’s that much less that’s available to you for the things you want and need.

The bottom line … the resources to pay for all those things didn’t appear from nowhere. Even if the dollars did. Even if the government didn’t take them in taxes.

So whether there is a government shutdown is microscopic in consequence compared to the federal deficits. Even if the media don’t want you to think about that.

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