Ryan vs Murray Budget – Part 2


As a follow up to my previous article concerning the above mentioned issue, the following has occurred: late Thursday evening, March 21st the Ryan budget came up for a vote in the US Senate. It was resoundly defeated by a vote of 59-40. The GOP countered with a resolution by Republican Senator Jeff Sessions of Alabama to put the Democrats on record to oppose balancing the budget by the end of the decade. It failed on a near party line vote.

On Saturday, March 23rd shortly before 7 AM EST the Senate approved a budget outline submitted by Democrat Senator Patty Murray of Washington by a vote of 50-49. So the Ryan Budget did not pass the Senate and the Murray budget which has passed the Senate must now go to the House of Representatives for a vote. It has almost no chance of passing the GOP dominated House.

So where are we? This is what we would call in North America; a Mexican standoff. Each Party standing firm and not backing down. The Democrats proposing a balanced approach and Republicans looking to torpedo “entitlements”. By as I said in my last article; it’s only an entitlement if you don’t pay into it. Anything other than that is a return on premium. President Obama is expected to release his own tax and spending plan in two weeks. Time will tell if whether he does this or not. He may just decide to support the Democrat version or may offer the GOP another “dove” in terms of giving them something that they want. Again, time will tell.

In the meantime the sequester cuts are still underway and some firms who are not government entities are laying off personnel. The Philadelphia Housing Authority just yesterday had to layoff 85 workers due to a 32 million dollar cutback from the sequester. Now this may not seem like a lot but this is only one entity in the United States and is a microcosm of things to come. The Federal employees have it a bit better as by law they must be given a 30 day notice before cutbacks occur and even then they have to take off one day a week between now and the end of September with no pay. So in effect they’re being hit with a 20% pay cut between now and September. Mind you, this is if you work for a Federal government agency. If you happen to work for a defense contractor and their project gets cut due to the sequester; well you’re out of a job. At this point, we have no idea how deep the rabbit hole will go.

If you recall, I also mentioned in my previous article that come April 15th if Congress did not come up with a budget, they would forego pay. I also said “this I have to see”. Well one of the resolutions voted on and approved was the forego pay aspect. Let me explain. The Senate and House voted on Thursday to extend funding for the US government until the end of September. This was passed in both houses. Because the US government is funded until this time period, the Senate doesn’t feel obligated to forego pay. Instead what they decided to do was to pay 20% of their salary to their charity of choice. This move was designed to show empathy with their fellow “brethren” who work in the Federal Government. If Obama doesn’t line item veto this, I don’t know what.

One of the interesting aspects this past week was Ben Bernanke and the FOMC’s eagerness to extend easing as it relates to security buybacks and the Federal Funds Rate. Could it be that Ben Bernanke himself and the FOMC for that matter are concerned with the aftermath of the Sequester? Could it be that Bernanke himself doesn’t know how bad it will be and is concerned because he knows that the US “recovery” is fragile at best? After hearing all this, it wouldn’t surprise me.

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Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States. Interested in Market Correlation? Want to learn more? Signup and receive Market Tea Leaves each day prior to market open. As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.

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