MORGAN STANLEY: ‘The Odds Favor A Government Shutdown’

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The government managed to get us passed the “fiscal cliff.” But they did so by creating three more smaller, but still substantial “cliffs.”

 

And according to Morgan Stanley’s Vincent Reinhart we’re likely to go over one of those cliffs, and it’s unclear what the consequences will be.

First, let’s review how we got passed the “fiscal cliff.”  Reinhart summarizes in a new research note:

The “resolution” of the sudden stop in the federal fiscal position that had been legislated for the end of 2012 created three risk events.  First, on or about March 1, the Treasury was forecast to run out of room under its statutory limit to borrow and run out of cash in its account at the Federal Reserve.  Second, absent legislative intervention, on March 1, sequestration kicks in, imposing across-the-board cuts in discretionary spending.  And on March 27th, budgetary authority to operate the government under a continuing resolution lapses, implying that the federal bureaucracy will have to cease the provision of all non-essential services.

Read more: http://www.businessinsider.com/reinhart-odds-favor-government-shutdown-2013-1#ixzz2J2xigUXU

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