Sixteen days of government shutdown at an estimated cost of $24 billion dollars and what do we have to show for it?  Nothing. 

The Big Picture 

Our economy has been limping along a fragile path of growth, stymied by lack of government spending coupled with little to no business investment.  Consumer spending has been strangled by sluggish job creation and little to no wage growth. 

The focus on deficit reduction to the exclusion of everything else has held back economic recovery and offset the extraordinary measures taken by the Federal Reserve to undo the damage inflicted by the 2008 financial meltdown.  

Unable to agree on whose ox to gore, our elected officials opted for a “slash and burn” policy that cut spending across the board, regardless of the need or success of affected programs.  Policies that exacerbate income inequality were left in place or made even stronger.  Working for an income has been punished in favor of investing for income, with capital gains, dividends and business income receiving preferential tax treatment.  The few jobs that have been created post-2008 recession have been concentrated in the low wage sector – according to the National Employment Law Project.  Those employees have lost the ability to bargain for raises or benefits while shareholders reap the benefits. 

The stock market reflects that imbalance, with the S&P 500 making record highs.  With productivity rising while wages are falling, corporations are flush with cash and profits, distributed to shareholders instead of workers.  Eventually this inequality will erode the overall standard of living and threaten society as we know it. 

I, Investor 

The Washington shenanigans delayed the release of key economic data.  The September Employment Situation report will be released by the Labor Department tomorrow, with inflation data on the wholesale and retail level reschedule for the 29th and 30th of this month.  Additionally, the October unemployment report will be delayed for a week, now due out on November 8th.  Due to the government shutdown, this data will be questioned along with surveys conducted for November reports.  The effects of the shutdown may distort the economic picture through the end of the year. 

Third quarter earnings reports peak this week with 30% of Dow Jones Industrial and S&P 500 companies slated to release revenue and profit numbers.  Financial services and technology will join the industrial sector in releasing data that just meets expectations.  Going forward, investors will focus on weak economic fundamentals that may hurt corporate bottom lines and quite possibly derail the current rally. 

In the meantime, sequestration cuts continue to affect services to the nation’s poor, sick, elderly and unemployed.   Head Start, Meals on Wheels, medical research, veterans’ benefits, special education and the justice system have seen a slash in spending, soon to be joined by cut in defense scheduled for 2014. 

Gridlock and the inability to reach consensus on the federal budget will pretty much guarantee a repeat of this futile exercise.  Welcome to our own version of insanity where we keep doing the same thing expecting different results.  

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