It was the day before Christmas Eve. A time when all of America is consumed with the holidays of Christmas, Hanuka, and Kwanzaa, to say nothing of the upcoming New Year's celebration.
The holidays are a perfect time for the minions in Washington to bury any news story. In 2009, the same players as today: Senator Chuck Schumer, Senator Mitch McConnell, and House Speaker Nancy Pelosi, used this same day, December 23, to pass the controversial Obama Care health package.
Again, this same group passed the new Omnibus Spending Bill this year on December 23. Wonderful, shouted the headline from the New York Times, the Congress has averted a government shutdown
And just in the time noted, Nancy Pelosi, in her last official act as Speaker of the House, rejoiced as the Bill passed. After all, said Madam Speaker:
"members have planes to catch, gifts to wrap, carols to sing, (and) religious services to attend ..."
And before you could say: "Jolly Old Saint Nick," Congress and the American People were off to the holidays. But before we join in the merriment. And at the risk of sounding like Ebeneezer Scrooge, let's examine how this all unfolded.
Its the responsibility of Congress to pass an appropriations bill for each of the 12 Appropriation Sub Committees. These are the subcommittees tasked with oversight of their section of the government. By tradition, the Appropriation Bills come before Congress in the summer, giving Congress plenty of time to review, debate, and vote on each of the 12 Appropriation bills.
By October 1, the new Fiscal Year for the US Government begins, and the budgets should be in place and ready to go for each of those 12 Government divisions.
Congress did do that this year. The October Deadline came and went, but no Budget approval. So, this government has been operating with no budget for nearly three months. Instead, Congress has been limping along, passing a succession of "Continuing Resolutions," providing just enough money for the various departments to pay their bills.
It's a little disingenuous for the Times to declare that a "government shutdown" was averted. The reality is that just another continuing resolution would have kept the doors open, just as it has for nearly three months.
You don't have to be a cynic, to believe that Pelosi, Schumer, and McConnell choose the day before Christmas Eve not to avert a shutdown but to bury the story.
And the story is this; the US Congress has just committed you and me, the average citizen, to a level of debt that will likely never be paid. By the time this budget is rolled out, every resident of this country will be saddled with $100K in debt.
Now, the Omnibus process is in itself fascinating. Rather than vote on 12 Appropriation Bills, the leaders in Congress lump them together and vote on one big package. It saves time, just one vote instead of twelve. But it also avoids oversight and review and allows large expenditures to slip under with little or no debate.
To show you just how significant this is, when asked just a couple of weeks ago how large this Omnibus Spending Package was, both Senators Schumer and McConnell agreed that it would be $1.5 trillion. It turned out to be $1.7 Trillion, an increase of $200 billion just like that. See how clever that Omnibus process is? Much of that increase, incidentally, was due to the escalation in aid to Ukraine. But you certainly wouldn't want to debate that publicly for all to see. Better to slip it under the Omnibus Bill.
Economists have observed that whenever a nation's debt exceeds the size of its economy (GDP), it usually causes economic growth to falter. Lower growth because of the interest and principal payments on that debt crowd-out investments in private enterprise. The United States' debt burden currently is 21% greater than our economy and destined to go much larger due in no small measure to this latest spending package.
We hope that the Congress can enjoy their holiday. I hope they caught those flights, wrapped those presents, and went to Church. We certainly would want to avoid things like the US Federal Budget getting in the way of the holiday.
Yesterday's Trade Balance deserves a second look. If you're like me, you may have seen the headline, which reported that the US Balance of Trade in Goods, at last, declined to levels last seen before the Pandemic. On the surface, that looked like good news. And to see the trade deficit decline by over 15% in November looked like a victory. You and I have been talking about our run-away trade deficit for over a year. And we indeed need to bring our trade balance, well, more in balance.
But a closer inspection reveals some not-so-good news here at home.
First, looking at the US Exports reveals that the rest of the world is doing well. Our worldwide export of goods in November was only down 3%, despite the Covid Lockdown in China, our most important trading partner.
It's on the import side that we see the real issue. Business imports show moderate declines in capital goods and industrial supplies. Not good, but not nearly as bad as consumer goods. Consumer goods for November were down 13%, one of the most significant month-to-month declines I've ever seen. And a sure sign that the American Consumer is hurting. Short supplies and higher interest rates are taking a massive toll on consumers' spending ability. The weak consumer is rapidly becoming the major economic story of the coming year and one that we'll follow closely.
On the calendar this morning, we'll see the latest in pending home sales and then complete rundowns from the regional Fed Offices in Richmond and Dallas.