Shortest Shutdown in History

Senator Rand Paul of Kentucky, expressing grave concerns about the federal deficit, filibustered a continuing resolution bill intended to keep the government open.

“We have a 700-page bill that no one has read that was printed at midnight. No one will read this bill, nothing will be reformed, the waste will continue and government will keep taking your money irresponsibly and adding to a $20 trillion debt,” Said Paul.

The bill was finally passed by the Senate, then the House at 5 am this morning and finally Donald Trump, that keeps the government open until March 23.

It also commits the government to an increase in the military budget of $165 Billion over two years and includes $90 Billion in hurricane relief. It includes appropriate debt ceiling raises until March 2019. The DACA/immigration/border security issue was not included in this bill.

This was not passed along party lines this time. The final vote of 240-186 includes 73 Democrats in favor and 67 Republicans against.

Is Senator Paul correct? Of course he is. While his timing is inopportune, the budget deficit will indeed be greater than last year. And its already massively out of control. Under Barack Obama our debt grew to be more than our GDP, going from about $10 Trillion to about $20 Trillion, jumping from 67% to 105% GDP to debt ratio. In fact, if we were geographically qualified, we would no longer be eligible to apply to the European Union, whose debt to GDP requirement is less than 60%.

Under President Trump, we are continuing to see deficits, but the current strategy is much different from that of the Obama administration. Under Obama, massive amounts of money went into social programs that were largely unproductive, i.e., pure spending. So far, Trump has provided a tax decrease, improved trade deals and other measures which should stir productivity in America. While we are in uncharted territory to some extent, it could very well be that new private sector activity could provide a tax base to offset the deficit numbers.

However deficit hawks have much to be worried about. A military budget increase does not stimulate the economy as well as direct support to business, nor does the massive infrastructure plan that has been proposed. There will be a Keynesian multiplier factor with this spending (when money spent in the economy, it is spent again by the seller, and then that seller spends it, and so on), however in the sophisticated modern economy everyone knows that stimulus to private industry has the same effect but is much more efficient and productive, so infrastructure programs are generally regarded as a net loss, despite some stimulating effects.

Will we fall off a cliff? The danger is there, but we have successfully kicked the can down the road.