On October 8, local time, the U.S. Senate's sixth vote on a short-term appropriations bill to end the government's "shutdown" failed again, and the government shutdown entered its eighth day.
In the bipartisan negotiations in the past week, there were both the White House's heavy signal that "automatic salary compensation may not be given to employees on leave", and there were also repeated failed votes and mutual accusations between the two parties in the Senate on the interim funding plan. There were no signs of compromise and agreement between the two sides.
At present, medical insurance subsidies are the core focus of dispute. The intertwined game between the two parties over budget pressure and vote considerations makes this "shutdown" more like a attrition game: see who cannot withstand public opinion and market counterattack first. At the same time, the public is also questioning how long the "shutdown" will last?
Tensions in the Senate, the provisional allocation bill again failed to be passed, government shutdowns entered the second week, and both sides fell into impasse.
The latest developments
Negotiations have no way out.
But the pressure is "increasing"
Until now, there has been no viable cross-party negotiation scheme in Congress, and the two sets of temporary allocation bills repeatedly voted in the Senate have been rejected. The Republican version of the scheme advocates the first opening of the government but does not extend the health insurance period; the Democratic version insists on extending the increase in health insurance subsidies during the epidemic to 2026 or more, but is widely resisted by the Republican hardships. The two parties do not have a viable negotiation framework, more than a compromise of negotiation.
At the same time, this "shutdown" also showed a "explosion point" different from the past-the White House hinted that federal employees on vacation may not enjoy the guarantee of "automatic salary repayment", while Trump himself said that he might consider cutting some government projects and jobs, but this is not an executive order. This has almost never happened in previous "shutdowns", breaking the expectation of "default repayment of salary" after the "shutdown" in recent years, and directly transferring the pressure to Capitol Hill and employee groups, leading to the escalation of the game.
The Washington Post commented that the White House’s move was “evidently hoping to make Congressional members feel more politically pressured through wage suspension” as a result of the move, which immediately caused the moderate Republicans in the Senate to object that “it should still be subsidized”, fearing morality and service capabilities are compromised; and on the other hand, the Democratic leadership also accused the White House of using employees as negotiating codes, demanding the provisional allocation to be clearly locked in the subsidy terms.
In contrast to the endless squabbling in Congress, the secondary damage caused by this "shutdown" is continuing to amplify. Since October 6, air traffic controllers have been working without pay, resulting in a shortage of personnel. The Federal Aviation Administration said on the 8th that on October 6 and 7 alone, airports in Boston and Burbank, Chicago, Denver, Houston, Las Vegas, Nashville, Philadelphia and Phoenix reported delays due to insufficient air traffic controllers. At the same time, more than 90% of the employees of the U.S. Securities and Exchange Commission are on leave, resulting in a near "shutdown" of IPO approval and securities market supervision. CNBC quoted market analysts as saying that if the Securities and Exchange Commission is unable to perform its duties for a long time, corporate financing and IPO plans will be fully frustrated, which will reverse push the business community to put pressure on Congress.
Trump said on October 7 that the White House plans to cancel some government projects as the government continues to "stop", and he will publish details about cuts in the coming days.
Three time windows.
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With the sewing coming into the second week, the White House, Congress, and markets are beginning to re-measure the resistance values of the "stop-swing".The mainstream analysis has roughly three possible endings, with different reversal mechanisms behind each.
The first possibility: Rapid hemostasis will be resolved in 5 to 10 days
Wall Street and many policy analysts are still betting that the two parties will compromise in the short term because data and markets have begun to "alarm." At present, some economic data scheduled to be released have been stranded. For example, the non-farm payrolls report originally scheduled to be released on October 10 may not be released. The Federal Reserve's upcoming interest rate decision reference will have a data blind spot and fall into "wild guess". JPMorgan warned in a memo to clients: "If employment data is absent for more than two weeks, the Fed will lose key references and market volatility will amplify sharply."
At the same time, as the Securities and Exchange Commission has allowed nine percent of employees to leave, IPO and key approvals have been halted; air transportation is also due to unpaid airways, increased leave, and flight delays have risen, NBC citing flight tracking site FlightAware data reports, only on October 6 and 7 two days, the United States delayed flights have exceeded 9000 flights, while the eighth morning alone has exceeded 720 flights.
Second possibility: medium-term seesaw delays for two to three weeks
As for the current core controversial issue of medical insurance subsidies, if the Democratic Party insists on writing medical insurance enhancement subsidies into the bill, while the Republican Party refuses to "suspend permanent benefits", then technical compromises are likely to occur, such as locking in a one-year or two-year transition period and setting an expenditure guardrail, that is, the subsidy will be extended until 2026, and the upper limit of premium expenditure will be temporarily maintained at 8.5% of the annual income of low-and middle-income families, but a trigger clause will be added.
Such a compromise is certainly a solution. In this regard, the New York Times analyzed that this kind of "fused compromise" is most in line with Washington's inertia, because it can not only satisfy the Democratic Party's demand to avoid "cliff premium increases", but also give the Republican Party a "fiscal brake" explanation.
However, the plan undoubtedly requires technical negotiations and legal text rewriting, which will take at least two weeks. Therefore, it is decided that even if the two sides reach an agreement, the "shutdown" will not stop immediately.
The third possibility: The worst outcome is around January
If neither side is willing to make concessions on the core issue of health care terms, and the White House continues to exert pressure through means such as backpay and state funding freezes, and moderates and hardliners within the Republican Party are unable to coordinate, the deadlock may drag into markets and credit rating agencies issue a bigger warning.
Currently, according to the model of the White House and Moody's, the "stop" could cause a loss of about $ 15 billion per week in GDP, although it is a model, but if the figure in the financial markets is amplified to debt and credit risk, causing financial market emotions to shift, will undoubtedly increase the pressure, and the pressure will re-shape the negotiating environment, the negotiating will and strategy of the two parties or will be adjusted with it.
The rating agency recently reminded in its analysis that frequent "stop-ups" aggravated doubts about the ability of the U.S. debt governance, "one more proof of the unpredictability of policy is the long-term rating pressure."
The government shutdown led to the closure of the Securities and Exchange Commission and the suspension of IPO document processing, which would undoubtedly affect market sentiment.
The key point.
Party rift in the public opinion market
Undoubtedly, the next few days will be the key window to observe the turns and the time will ultimately depend on when the three signals are triggered.
The first is the rebound of public opinion. Once the cash flow of federal employees is tight and public benefits (such as food stamp programs, tax refunds, and scientific research funds) are delayed, public opinion accusations will immediately heat up, causing a scorching heat to both parties. Senator Manchin said in an interview with Politico, "Neither party can continue the stalemate without paying a political price when hundreds of thousands of families are unpaid."
The financial and technology sectors have now begun to worry about regulatory empty windows and data vacuum, and if the rating agency continues to issue negative outlook, the pressure of the state bond market and the stock market will force Congress to act.
The Republican moderators have said that medical insurance subsidies can be “accepted for limited extension” and the Wall Street Journal has pointed out that Republicans are increasingly anxious about continued delays and that business factions are concerned about the chain shocks of funding costs and regulatory “stop-ups”. At the same time, there are also people inside the Democratic Party who believe that there must be financial constraints, otherwise it will bring heavy scrutiny to the election campaign. These partisan cracks will promote the emergence of compromise conditions.
Based on the above information, public opinion analysts believe that 10 to 14 days should be a relatively reasonable base line, sufficient to compromise public opinion and market costs, while not yet causing a systematic credit crisis. If health insurance subsidies can be dismantled separately negotiated, Congress hopes to first pass a short-term allocation to restart the government and then deal with long-term health insurance finances. But if the White House and the Republican hardships persist in exchanging political codes with extreme pressure, then it is not excluded that the 35-day war of consumption such as 2018 to 2019 will repeat again.
As the media commented, this "shutdown" is not only a budget crisis, but also a second stress test of the resilience of the American system. The result will affect the psychological expectations of every future appropriation negotiation. (CCTV reporter Wu Weihong)