I think a continuing shutdown of the government and debt ceiling default are increasingly likely. Additionally, I think this artificial Republican-created crisis may continue for some time with a highly unpredictable but most likely negative impact on the U.S. and world economies. I think that Obama and the Democrats will and should continue to insist upon a vote in the House to open the government AND a clean debt ceiling increase through 2014 prior to any negotiation or even conversation about the budget, a negotiation/conversation that covers further deficit reduction through a combination of tax reform generating increased revenues and targeted spending cuts that protect the most vulnerable. Notice that almost no Republican is even discussing their original demands for defunding or delaying Obamacare any longer. If Obama and the Democrats give in to Republican demands for negotiations/conversations now, they will simply be inviting a string of future manufactured crises resulting in constant government-by-crisis.
The current crisis will end only when the leaders of the Republican Party in the House (i.e., John Boehner and non-Tea Party Republicans) decide to end the crisis for the good of the country even if that means their political careers will be significantly damaged, if not ended. I can’t predict when this will happen. I can only say that I would not be surprised if my plans for a short vacation to some of the national parks next Spring are delayed and I expect our stock investments to take a significant hit over the next few months. Additionally, I expect that interest rates will begin to slowly rise and then may take off if the crisis continues for several months. If that happens, the deficit, which was beginning to come down, will once again beginning growing.
The only good thing that may come from all of this is that the Republicans may lose control of the House in 2014 paving the way for a Democratic-controlled House, Senate and White House to begin to repair the damage and to bring some sanity back to Washington.
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