A Reason For Economic Uncertainty

The Index of Economic Uncertainty could come in handy tomorrow.

Occasionally illustrating an emotional roller coaster, the Index is based on the frequency of key words in news articles, the inventory of expiring tax provisions and economic forecasts. Its creators, two scholars from Stanford and one from the University of Chicago, indicate we should care because such diverse phenomena as CDS spreads, Fed decisions, market “drags” and a host of other issues could have a cause or effect connection to economic uncertainty.

As you can see below, economic uncertainty spikes when the Congress hits budgetary gridlock, there is a foreign policy crisis or the Dow plunges. (I’ve identified other letters below.)

From: www.policyuncertainty.com

Where are we going? Economic uncertainty has been trending downward. But all could change tomorrow.

The Cromnibus

Tomorrow, the government (sort of) runs out of cash.

Because the President’s budget was never approved, we’ve been depending on continuing resolutions and omnibus legislation. A continuing resolution extends specific current spending for a stated period of time while omnibus legislation, applying to spending proposals from Congressional committees, is broader.

With previous temporary measures expiring tomorrow, the Congress says it might proceed with the cromnibus. The cromnibus is a compromise that sidesteps a shutdown. Reminiscent of the cronut–a croissant/donut hybrid–the cromnibus combines a continuing resolution that targets Homeland Security allocations and omnibus legislation for 11 of the 12 spending bills Congress passes each year. The problem, though, is that the cromnibus has been encumbered with lawmakers’ “riders” (additions) that are controversial.

Our Bottom Line: Fiscal Policy

Our fiscal policy blueprint covering taxes, expenditures and borrowing, a Presidential federal budget has not been passed by the Congress since 2009. As a result, temporary legislative procedures determine the fate of funding for federal employees, for discretionary government programs and for the federal debt.

a. Balanced Budget Act b. 1987 market crash c. 1st Gulf War d. Clinton election e. Russian crisis & LTCM f. Bush/Gore election dispute g. 9/11; h. 2nd Gulf War i. Stimulus & Fed policy changes j.Lehman and TARP k. Obama election l. Banking crisis m. Midterm elections n. Debt ceiling disagreement o. Shutdown

Source: Economic Uncertainty Index