Why the Government ‘Shutdown’ Critics Have It All Wrong

And how do you like that? Mr Market was right all along. He knew the fix was in. This is an economy – and a society – that depends on easy credit. No way were the politicians going to stop the credit from flowing. When they threatened to cut it off, Mr Market ignored them. Stock prices kept going up.  Turned out, he was right again.

We’re back home…in good ol’ Balawmer…with football season in full flower.

Our trip took us to Paris, London, Buenos Aires, Salta, Miami, Ft. Lauderdale and then home again. The only travel problem we had came in our last stop, Ft. Lauderdale, where the agent at check-in seemed unable to operate his own computer system.

While we were traveling, often out of range of modern communications, Washington was making a public spectacle of itself. Wherever we went, cab drivers, hairdressers and barkeeps kept us up-to-date:

Wow…what’s going on in the US? Sounds like they’ve gone crazy…‘ said one.

So, are they really going to shut down the government?‘ asked another. ‘That will be a first.

Have Republicans lost their minds,‘ began a third. ‘Who’s going to vote for them?

To the foreigners, the spectacle seemed sordid and stupid. To us, as little as we saw of it, it was immensely entertaining. First, because we never doubted that the pols would come through with a deal in the end. And second, because it would have been better if they hadn’t.

But the show’s over…at least for now. Bloomberg:

Congress Vote Ends Impasse to Be Revisited in January

The passage last night by wide margins — an 81-18 vote in the Democratic-led Senate, followed by a 285-144 vote in the Republican-controlled House — allows the U.S. to avoid default and ends the shutdown that began Oct. 1 and has taken $24 billion out of the U.S. economy.

"We’ll begin reopening our government immediately and we can begin to lift this cloud of uncertainty and unease from our businesses and from the American people," Obama said last night at the White House after the Senate voted.

The news reports of the settlement on Wednesday night told us that the agreement was reached after the standoff had taken "$24 billion out of the economy."

People took this news as though it were a tragic fact…like the sinking of a cruise ship or a shooting at an elementary school. But how was it possible for $24 billion to be taken ‘out of the economy?’ Where did it go? To another planet?

This is what makes government so amusing.  It is like barroom chatter late at night – full of things that couldn’t possibly be true yet are accepted by everyone present as Gospel.

The $24 billion refers to the money that the feds did not spend. But did it vanish? Not at all.

Not that we have anything against government; on the contrary, it’s always a hoot. But government at its best is a very modest affair. It puts a cop on the beat – ready to knock heads, if necessary, to maintain peace and quiet. It puts a judge on the bench, able to enforce contracts and protect property. It raises the flag on national holidays. Otherwise, it butts out.

But few people are content with Jefferson’s kind of government. They want Hillary Clinton’s kind of government. But as it grows, government quickly reaches the point of declining marginal utility…and then slips into its bad habits – that is, grand larceny.

The money that was supposedly taken out of the economy didn’t disappear. It remained with its rightful owners…neither stolen, nor redistributed. The zombies were short $24 billion; but the productive sector was ahead.

And what were the feds going to do with that $24 billion? In the event, they shut down national parks – one of the few federal activities that might be a paying proposition. Otherwise, instead of driving to work, filling out forms and chatting over coffee, federal employees were sent home… There, they enjoyed their leisure…or spent time on home repairs.

The money that would have paid them to come on the job, was saved, spent, or invested in other ways. Who’s to say that the world is a worse place as a result?

Regards,

Bill Bonner
for Markets and Money

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Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

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3 Comments on "Why the Government ‘Shutdown’ Critics Have It All Wrong"

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justin king
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And the money lost to private business by the RIPPLE EFFECT of the 800,000 furloughed ??

Henry Hazlitt
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Justin King wrote:
“And the money lost to private business by the RIPPLE EFFECT of the 800,000 furloughed ??”

Justin, have you ever heard of the Broken Window Fallacy?

maxblockm
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It vanished because it’s going to go towards paying for the 16 day paid vacation they had…

wpDiscuz
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