Reuters blog archive
from Nicholas Wapshott:
Victories come in many sizes. The Battle of the Little Bighorn, for example, at first seemed an overwhelming win for the Sioux. But it soon became clear their success would not last. Who really won the Alamo? The Mexicans? Try telling that to a Texan. So, who won the Battle of the Shutdown 2013? The conventional view is that the Tea Party Republicans were seen off by the congressional leadership in both parties. Having made their protest, disrupted the nation and cost Americans a great deal in anxiety, time and treasure, they lost the battle -- but promise to resume the war another day. Perhaps as early as January.
While moderation appears to have triumphed and dogmatic extremism held at bay, the 800,000 federal workers and those who need their services were the obvious losers of the budget and debt ceiling battle. But so were those who hoped to derail the Affordable Care Act, freeze federal government spending and balance the budget.
Richard Fisher, president of the Dallas Federal Reserve and one of the U.S. central bank’s arch inflation hawks, took us by surprise this week – he told Reuters that, given all the uncertainty generated by the government shutdown, it would not be prudent for the Fed to reduce its bond-buying stimulus this month.
“It is just too tender a moment,” he said. That was on Tuesday, before a last-minute deal averted a debt default but set up additional uncertainty by pushing the statutory spending cap into February.
from Reihan Salam:
A few days ago, an older and wiser friend of mine and I had a lengthy conversation about divorce, that most cheerful of subjects. He noted that one of the surest signs of a marriage in trouble was that both parties were convinced that they had been forgiving of various betrayals and accommodating of various foibles, yet this generosity hadn’t been reciprocated. Naturally, this brought to mind the increasingly strained relationship between Tea Party conservatives and Republican regulars. What better way to describe how Ted Cruz must feel about John Boehner, the sellout, and how John Boehner must feel about Ted Cruz, the zealot?
Molly Ball of the Atlantic recounts the quasi-mutinous musings of various conservative luminaries, like Glenn Beck of TheBlaze, Erick Erickson of RedState.com, and Sean Hannity of Fox News, among others. As recently as 2010, the notion that the Tea Party movement would bolt from the GOP to establish a party of its own would have seemed absurd. But now, in the wake of a fiscal showdown that’s proven to be an utter fiasco for congressional Republicans, the idea of a bona fide divorce is gaining credence. Among the Tea Party faithful, there is a widespread conviction that the effort to defund Obamacare would have proven successful had Speaker Boehner and his anxious allies been tougher, and more willing to risk breaching the debt ceiling. Republican regulars, meanwhile, are largely convinced that the defund Obamacare effort was a hopeless indulgence that exacted a real political cost. At least one critic of the Tea Party movement, David Frum of the Daily Beast and CNN, has argued that Republicans would benefit if “the Sarah Palins and the Ted Cruzes who have done so much harm to their hopes over the past three election cycles” were to bolt.
from Ian Bremmer:
When I write about our new G-Zero world, I am describing an international phenomenon: a global environment in which no power or group of powers can sustainably set an international agenda. The global community, used to orienting itself around a collection of U.S.-led powers, has fallen victim to a widening leadership vacuum, what with the United States disengaging from foreign affairs and Europe too busy with its own crisis. Emerging powers like China have grown large enough to undermine a Western-led global agenda -- but not yet developed enough to prioritize their own international role over their domestic concerns.
Every major power is too busy watching out for its own needs to focus on the bigger picture. As a result, the international community has been unable to make any progress on pressing crises like global warming, a civil war in Syria, or the rise of cyber warfare. A vacuum of leadership has led to a dearth of mutually beneficial planning.
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During the recent round of financial crises, policymakers have done a whole lot of “kicking the can down the road”.
The latest is taking place in the United States where a fiscal stalemate between Republicans and Democrats has forced the first partial government shutdown in 17 years. It has also raised concerns about a U.S. debt default, should the government not meet a deadline this week of raising the debt ceiling. That has kept short-term U.S. interest rates and the cost of insuring U.S. debt against default relatively elevated.
from Ian Bremmer:
Ever since the government shutdown began, various federal departments have been forced to furlough nonessential personnel. The specter of the United States’ first default in history has become a bargaining chip for American politicians. That has rankled the international community, and it only compounds the backlash we’ve seen recently in response to Obama’s flip-flopping on a Syria strike and the NSA surveillance revelations. It’s clear that international consternation is not enough of an incentive for the United States to change its behavior. As I wrote recently in this column, foreign policy simply isn’t a priority for the Obama administration.
Buffeted by the shutdown crisis and leery of the coming debt ceiling fight, Barack Obama canceled his trip to Asia last week, where he would have attended the Asia-Pacific Economic Cooperation conference. Obama sent John Kerry in his stead to shake hands, dress in funny outfits, and engage in all the other usual hallmarks of a foreign convention of leaders. Obama was right to think that had he attended himself, the optics wouldn’t have worked in his favor. He would have looked distant and overly-casual to the crises at home if he were in Bali glad-handing with foreign leaders. But the point is not whether Obama made the right decision to cancel -- he did -- but whether he made the best decision possible. He could have done more, which we’ll get to in a bit. But instead of thinking creatively, the administration checked down to the obvious decision and simply sent Kerry.
from Reihan Salam:
As the government shutdown grinds on, the Republican leadership in the House is struggling to unite GOP lawmakers around a fiscal deal that Senate Democrats and the Obama administration would be willing to accept. Speaker John Boehner has reportedly said that he is willing to rely on Democratic votes if necessary to pass an increase in the debt ceiling. Yet he also insists that he will fight for spending cuts and entitlement reform in any debt ceiling bill, in a nod to conservative members who are convinced that he is eager to sell them out.
Whether or not Boehner succeeds, it is increasingly difficult to deny that the Republican negotiating position is being constrained if not dictated by a small minority of 30 or so members from safe seats who seem largely indifferent to leadership demands, or rather leadership requests. The result is that the much-derided Republican establishment is in a state of panic, sensing that GOP intransigence will lead the party to squander the political opportunity created by the president’s declining fortunes and the persistent unpopularity of Obamacare. How has party discipline broken down to this extent, and what, if anything, can Republicans do to restore it?
Now that Washington’s circus-like government shutdown has put a damper on hopes for stronger U.S. economic growth going into next year, dovish Federal Reserve officials again appear to have the upper hand in the way of policy commentary.
Take Eric Rosengren, the Boston Fed President who had been unusually quiet as the tapering debate gathered steam. In a speech in Vermont on Thursday, he returned to a familiar theme – the central bank still has plenty of firepower and should not be afraid to use it.