Government Shutdown Looming? Not Anytime Soon

1. March Jobs Report Was Much Weaker Than Expected
2. Media Warns of Government Shutdown at End of April
3. Understanding How “Extraordinary Measures” Work
4. Congress Will Raise Federal Debt Ceiling – Count On It
5. Why the Upcoming Spending Battle Will Get Very Ugly


Over the next couple of weeks, the mainstream media is likely to deluge us with warnings that the government could shut down at the end of this month. According to the Treasury Department, that’s just not true. Whether you are a conservative or a liberal, you should know the facts surrounding this issue.

The media will try to convince the public that hardline conservative Republicans actually want to see a government shutdown so that they can use it to negotiate political victories on controversial issues such as comprehensive tax reform, healthcare reform, budget cuts, infrastructure spending and others.

The truth is that even though the government reinstated the so-called “debt ceiling” in March, and the current spending resolution expires on April 28, the government will be able to continue to operate pretty much as usual until sometime this fall. It’s complicated, but I’ll explain it all as we go along today.

Before we get into that discussion, let’s take a brief look at last Friday’s very disappointing unemployment report for March. It was the worst jobs report in over a year.

March Jobs Report Was Much Weaker Than Expected

Employment growth unexpectedly slowed in March, hurt in part by job losses in the retail industry. Nonfarm payrolls grew by just 98,000 in March, according to last Friday’s Labor Department jobs report. Payrolls had been expected to increase by 180,000 in March, according to the pre-report consensus.

The good news, if you can call it that, is the headline unemployment rate fell slightly to 4.5%, in March, down from 4.7% in February. Some blamed the weak jobs report on winter storms last month, but that does not nearly explain why new job creation was the weakest in almost a year and about half of what was expected.

Change in jobs

The Labor Department also revised down its estimates for job creation in January and February, with the combined total falling by 38,000. Average hourly earnings rose at an annual pace of 2.7% in March, following a 2.8% increase in February.

The retail sector suffered the most in March, with almost 30,000 jobs cut. Big box department stores are expected to close at least 3,500 stores this year alone. Department stores like JCPenney, Macy’s, Sears and Kmart are among the companies shutting down stores, along with mall chains like Crocs, BCBG, Abercrombie & Fitch, Guess and Bebe.

It remains to be seen if the much weaker than expected March jobs report was an aberration or a sign of things to come.

Media Warns of Government Shutdown at End of April

To understand the ensuing discussions over the debt limit/ceiling and the possibility of a government shutdown this year, we need to look at two separate issues. Back in November of last year, Congress passed a measure that effectively suspended the debt ceiling until March 15 of this year.

As such, there has been no limit on government spending since late last year. Yet as of March 16, the old debt ceiling just under $20 trillion went back into effect, and the national debt is already at that level.

So since then, the Treasury Department has been funding the government using so-called “extraordinary measures” that don’t officially add to the national debt – at least not yet. The Treasury says it can continue to pay the government’s bills in this manner until sometime this fall. So it’s likely to be business as usual until sometime in late October, unless the Republicans somehow get serious about drafting a new federal budget before then.