Council on Foreign Relations Global Economics Monthly
Issue 6 | November 2013

Global Economics Monthly

In Search of Bargains, Grand or Bland

Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics

Now that the smoke has cleared, what have we learned from the fiscal standoff in Washington? Here are five takeaways from the shutdown.

Another Short Kick of the Can

October's continuing resolution to fund the government and raise the debt ceiling bought only a few months of breathing space. On the surface, the resolution did nothing to resolve the fundamentally different visions of government separating Democrats and Republicans. Democrats insist on additional revenue in any deal addressing entitlements, while Republicans insist that tax increases are off the table. As both sides have staked out maximalist positions, it is hard to envision a compromise during the short time frame set out for these negotiations.

Without any carrots or sticks to incentivize negotiators, the committee tasked with hashing out a budget deal by December 13 appears poised to fail. The more serious deadline is January 15, 2014, when spending authority will need to be renewed to avoid another shutdown and when sequestration would go into effect if spending is above current caps. The bottom line: Washington continues to govern by crisis. Read more »

Looking Ahead: Kahn's take on the news on the horizon

China's Leadership Meets

A "go slow" approach to reform and lack of detail from the November 9–12 Central Committee meeting could disappoint markets.

Banking Disunion

Europe will announce more details of its upcoming banking review—if its nations can agree.

Treasury Complains

Last week's U.S. Treasury exchange rate report highlighting dissatisfaction with German and Chinese current account surpluses will be a talking point in November.

From the Macro and Markets Blog

Shadow of the Sequester

Robert Kahn

I am skeptical that congressional budget conference would produce any deal, much less a grand bargain. Most likely, Congress would fail to find common grounds, instead opting for a continuing resolution for the remainder of the 2014 fiscal year that locks in the sequester level of spending. Read more »

When Is the Next X Date?

Robert Kahn

Depending on tax flows, extraordinary measures available, and deficit levels, the United States will again hit the debt limit (X Date) anywhere from March to July. If we assume that 2014 will look broadly like 2013, but with a smaller deficit, it's possible the X Date will be pushed off to April 15 and then until summer. Read more »

Celebrating Failure

Robert Kahn

The Senate deal which ended the government shutdown is, at its core, a policy failure. It doesn't address any of the underlying causes of the conflict and ensures another fiscal showdown in January. Read more »

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