The Return of Policy Uncertainty

From Hatzius et al., in Goldman Sachs Global Macro Research yesterday:

A federal shutdown due to a funding lapse looks no less likely than it did two weeks ago, and we believe the probability is nearly 50%. The Senate is expected to begin voting later this week on a funding extension, but the House looks unlikely to act until shortly before the September 30 deadline.

The impact on measured policy uncertainty is shown in Figure 1 below.


UPDATED Figure 1: Daily policy uncertainty index (blue), and 7 day trailing moving average (bold red). Source: Baker, Bloom and Davis, at, accessed 9/22/2015 9/23/2015.

The reason we are fast approaching the brink? From Politico:

McConnell set up a Thursday vote that would fund the government through Dec. 11 while gutting federal funding for Planned Parenthood and boosting defense spending by $13 billion — an approach favored by conservatives on the right.

That legislation will fail due to Democratic opposition, allowing McConnell to argue that Senate Republicans tried the hard-line tactic proposed by Sen. Ted Cruz (R-Texas), but it couldn’t pass. McConnell could then turn to a “clean” funding bill that Democrats have promised to support.
“There’s going to be votes to defund Planned Parenthood. But I think, given the president’s opposition and Democrats’ opposition, at some point, I anticipate there will be a clean (continuing resolution),” Senate Majority Whip John Cornyn (R-Texas) told reporters. “But, that’s not the end of the fight over late-term abortions and over Planned Parenthood.”

But first, McConnell agreed to test Cruz’s approach, touting the benefits of a bill that is at bipartisan spending levels and “would defund Planned Parenthood and protect women’s health by funding community health clinics.” And consistent with the GOP leader’s tight-lipped nature, McConnell refused to confirm that he will then turn to a clean CR when the attack on Planned Parenthood fails later this week.

By moving first, the Senate has more time to clear through the procedural hoops in the chamber — allotting just a handful of days before a shutdown to throw the funding hot potato into the House’s lap. The move would put the onus on the lower chamber to prevent a federal shutdown. It also would make it harder for opponents like Cruz to throw sand in the gears at the last moment.

But there’s no guarantee that the House will accept what the Senate sends over. And there’s no guarantee Cruz won’t fight McConnell tooth and nail, as he has done all year, though, at this point, he’d have to mount a herculean effort to disrupt McConnell’s government funding train.

Oh, and there’s the debt ceiling issue as well.

20 thoughts on “The Return of Policy Uncertainty

  1. Ricardo

    It is amusing that Republicans would call a bill funding the harvesting of body parts a clean. Next thing you know the Democrats will be firing soldiers who attempt to stop pedophilic rape…Oh, that’s right, that is already happening.

    Who would have thought, even 5 years ago, that one major party would protect the auctioning of harvested of body parts and pedophilic rape? And no one in that party seems at all outraged. In my wildest nightmares, I could not think of any policies worse than these.

    1. Tom

      Get with the Democratic program, Ricardo. All that matters is that the government remain open and large. Defending moral positions is so 20th century and has no place in secular society. By “power of the purse” the Constitution means that Congress is supposed to roll over and fund whatever the President wants.

      1. Ricardo


        I am so glad that the Democrats stay away from moral issues like passing funding for an abortion provider, feeding rich students in schools, changing the definition of marriage so that even the terms husband and wife are being forbidden on “marriage” licenses, and on and on. Nope you will never find a Democrat forcing morality down the throats of the American people through government and the courts.

    2. curmudgeonly troll

      Hyperbole and misrepresentation aside, shutting down the government is really going to accomplish those goals and demonstrate fitness to govern.

  2. spencer

    Could you tell us why there is anything wrong with harvesting body parts.

    It is a significant factor in medical research that steadily improves our quality of life.

    But on the other hand people of your persuasion are constantly trying to lower our standards of living, so I should not be surprised.

      1. howard

        That, of course, would be assault, Patrick l. Sullivan, and no, it’s not ok for you to assault anyone. Meanwhile, what is it, at least 5 states have reviewed the footage and found nothing wrong.

        Not that in years of posting nitwit comments at various sites you have ever shown yourself interested in reality.

        1. Patrick R. Sullivan

          Please explain why it is not assault–actually, murder–to harvest baby parts from a defenseless baby?

          ‘…at least 5 states have reviewed the footage and found nothing wrong.’

          Define ‘wrong’.

          1. baffling

            pat, because through a part of the gestation period the “baby” is not some independent entity. it cannot survive outside of the womb on its own. you are extending your definition of “defenseless baby” into an area it does not apply. but i notice you have no problem telling a woman to do exactly as you say.

      2. spencer

        I have signed up to donate my body parts for medical research after my death.

        I’m still waiting for you guys to tell me what is wrong with this.

        You seem to think it is a bad thing, why?

        1. Ricardo

          Why wait until death? If you donate it while you are still alive your family could get more money for your body parts.

  3. howard

    All you tough-talking fake moralists are, I’m sure, up in arms about how cadavers are acquired for medical students. I just know you are.

    1. Ricardo


      You are probably correct. Medical students would be much better educated if live bodies were used and organs were inspected and removed en vivo.

      1. baffling

        organ transplants, such as the heart, are essentially what you are arguing against, whether you realize it or not. a transplanted heart does not come from the poor soul who died in the automobile accident, and when they reached the hospital the heart was removed to help another human. the heart needs to be removed within minutes of death, else it suffers irreparable damage. this is usually done in a controlled environment, when the doctors decide to remove the life support in the operating room so that the organ can be harvested in a healthy manner. so are you also morally against the harvesting of organs for transplants?

        while we are on the moral high ground, perhaps we can also reconcile the spending of government money for the administering of the death penalty. i certainly would believe somebody with the moral high ground, such as yourself, would be adamantly against the death penalty-the killing of a living, breathing human being. yet i have found a strange number of people who believe in the sanctity of life, who have no problem passing life and death judgement on a fellow human being. ricardo, i am sure with your moral high ground you do not fall into this category. i am simply posting an observation i have made over the years.

  4. ottnott

    It strikes me that the GOP could reduce some of the contradictions in their various positions by requiring pregnant women to undergo forced implantation of a firearm within the womb (currently, to our country’s great shame, a gun-free zone) so that the fetus could defend itself if the need arose.

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