Who says it can’t happen here?
Will the unthinkable happen? Will the stalemate between Congress and the Clinton administration over the federal budget result in the government defaulting on its debts this week and, at least temporarily, going out of business effective midnight Monday? At least some White House officials seem to think so. Late last week, White House Press Secretary Mike McCurry said “there are no chances” of reaching agreement with Congress to avert a government shutdown, adding that default was likely. Still, the traders and investors who would be directly hurt by a government failure to pay interest and principal on securities were still thinking over the weekend that default was a long shot. Even if the government is barred from temporarily raising its $4.9 trillion debt limit until a federal budget is approved, the government can still make payments on existing securities by using several contingency plans, including tapping the $21 billion in funds in its Federal Employee Retirement Fund, the traders and investors say. Moreover, they contend, no U.S. political leader in his right mind would want to be held responsible for the widespread financial ripples a default could cause in the corporate, mortgage-backed and municipal bond markets, as well as in the stock markets. Time, however, is running out.
Vets, new retirees would hurt most
In the event of a federal government shutdown, war veterans and new retirees would feel the pinch most. No veterans’ benefit checks would be mailed and while Social Security checks would be issued, new applications could not be processed. New applications for food stamps also would not be taken. Medical staff would remain on duty at veterans hospitals, however. Also the Postal Service, which is self-supporting, would continue mail deliveries as usual. Safety workers and military personnel would remain on the job, too.
Midwesterners’ confidence slipping
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Either those of us who live in the Midwest know something others don’t or we’re simply pessimists by nature. While consumer confidence remains fairly steady in other parts of the country, it continues to sink here. In fact, it’s at a 66-week low, according to the latest weekly Money Magazine/ABC News poll. The region’s consumer comfort index sank to minus-16 from minus-13 last week, the poll found. Over the last six weeks, the consumer comfort index in the Midwest has slid 27 points. Moreover, Midwesterners are losing faith in the economy (67 percent of those polled last week said they felt negatively about it, up from 64 percent the week before and 53 percent since late September. Nationally, consumer confidence held steady this week from last week.
Stagnant wages worry Wall Street
Wall Street economists are beginning to express concern over stagnant wages among employees at a time of strong corporate profits and robust workplace productivity gains. Stephen S. Roach of Morgan Stanley & Co. calls it the “dark side of the productivity-led recovery.” “As impressive as the productivity gains have been, they have not been matched by comparable gains in worker rewards,” he said in a panel discussion convened last week by U.S. Labor Secretary Robert Reich. “I think that the potential and real consequences of this for the economy and for all of us are quite serious,” added Steven Rattner, managing director of Lazard Freres & Co. “When you look at the fact that the average CEO of this country makes 150 times what the average worker does, up from 35 times 20 years ago . . . I think even those of us who are in business can look at this and say, `This just can’t be the right answer,’ ” Rattner said.