00:00So when you take stock of the different issues and the fact that at least right now it seems like both sides are digging in rather than looking to compromise with each other, what's your best instinct as for how long the shutdown could last?
00:13Yeah, I mean, this has been our concern that if the government did shut down, that you just had a higher chance of a more prolonged shutdown. As Eric said, that October 15th date where some active military service people may miss their paycheck, that could be an inflection point. It also could be November 1st, which is when the ACA subsidies folks get notified that those will be expiring, that their plans will be changing.
00:40And I think that the real question here is, do those moderate Democrats and those moderate Republicans, does that kind of coalition grow, the one that Eric just talked about? And do they become, you know, they tip that vote over that 60 vote?
00:55Keep in mind, you need 60 votes in order to open the government. Again, I think Democrats are pretty dug in, but the vote both today and last night was telling. You had Senator Fetterman, you had Senator Angus King, and you also had Senator Cortez Masto from Nevada.
01:14So I think that kind of the upshot here is, you know, it will depend on how strong this coalition is in terms of the Democratic Party.
01:21Well, that's what I'm curious about, too. I mean, I know everyone's focused on whether the Republicans are compromising, but I'm glad you're bringing up Fetterman.
01:26I mean, there are a few other folks in there that are in districts or represent states, I should say, where this is going to be a lot more delicate.
01:32It's not just about siding with what the Democrats want. So I do wonder if we will see the Democrats fold maybe a little bit more quickly than we would on the Republicans.
01:40Yeah, I think that, you know, the progressive left is worried about that. I mean, I think that Senator Schumer has a lot of pressure to really to avoid that.
01:48You know, again, I think that sort of the majority of Democrats right now in the Senate, you know, the 47, view this as a way to really show their base that they are fighting, that they are opposing the president.
02:03Obviously, they got lambasted last March when they reopened the government, that they didn't shut down the government.
02:08But I think that sort of this is the question, like how long can this sort of, you know, this is durable.
02:14But what do you make of the messaging coming out of the Democrats?
02:16I know they want to focus in on Obamacare, on ACA, but there has been a lot of discussion that really this is much more about Trump and trying to blunt his power.
02:23But they're not necessarily saying that explicitly.
02:26Well, yeah, again, I think this is, I think that they, so if you just take a step back, the two things that Congress has to do is fund the government and then raise the debt ceiling.
02:34The Republicans have neutralized that debt ceiling issue because in the one big, beautiful bill, their debt ceiling was raised by $5 trillion.
02:42So that is no longer a source of leverage for the Democrats.
02:45So this is really it.
02:47Now, they have criticized the sort of same strategy that Republicans have used before.
02:52This is a kind of a non-funding issue.
02:55This ACA subsidy, this doesn't really relate to the funding of the government.
02:58So they're kind of repeating, actually, the playbook that Republicans have done before.
03:02But I think they are there.
03:03They're making the calculus that any sort of downside, kind of political fallout from the shutdown is worth it because they're shining a spotlight on these ACA subsidies.
03:11Whether that actually will ring true, we'll see.
03:14I think, you know, from our perspective as, you know, market participants, what does this mean if the government does is a more prolonged shutdown?
03:22The longest full shutdown that we've seen was back in 2013.
03:25That was for 16 days.
03:26The catalyst there was the debt ceiling needed to be raised.
03:30There is no such catalyst.
03:31I think that is our concern, that once you actually shut down the government for longer, you get these nonlinear economic effects.
03:37And, of course, you don't get data either, which makes the Fed's, you know, kind of reaction function much more difficult.
03:42So maybe you don't have that catalyst this time around, that forcing action.
03:45But it does come at a very urgent time when you think about where the Federal Reserve is in their policymaking and where we are in the labor market.
03:54I mean, we were supposed to get those jobs figures on Friday.
03:57We did get ADP today.
03:59We know that those two don't always match up.
04:02So when you think about some of the alternative sources of labor market data that do exist out there,
04:08how good of a picture can you basically put together of the labor market without the official government data?
04:13Yeah, I mean, I think that it's not quite flying blind because, of course, you do have the ADP, you do have ISM.
04:19So you have some sort of, you know, feel for what's happening with the economy.
04:24But, again, should this be a more prolonged shutdown, not only do you not have the release of that data, the federal data,
04:31which is obviously the gold standard, but then you don't also have the collection of that data.
04:36And so this, I think, is quite important.
04:37So right now, if the government were to reopen, there would be really no kind of issue in terms of the data release.
04:44But if it were prolonged, that means that all the data collection that they would have been doing otherwise in, say, October, they would not be doing.
04:50So that's going to be even a longer delay.
04:53So I think, again, to serve to your question, not quite flying blind, but, like, much closer.
04:58It makes the Fed, who's already in a tricky situation, right, with kind of sticky inflation and definitely some payroll weakness, you know, even harder.
05:06And we kind of forget we still don't have a head of the BLS, and we're talking about furloughs in the BLS over the next.
05:12Yeah, can I actually, I think that's, I think one actually thing that we also kind of noted for our traders this morning was the fact that that BLS nominee was pulled by the White House.
05:21Because we've been telling our clients, you know, look at these committees.
05:23They are sort of the first stop in terms of Senate confirmation.
05:26And if you get pushback on the BLS, director, or more importantly, I think for our markets, you know, the Fed, then you're probably going to see a more orthodox candidate emerge for the Fed and for the BLS.
05:40You think Trump's going to put a more orthodox person?
05:41I think he's going to have to because they had to withdraw this partly because of political pushback from, you know, the Senator Murkowski's and Senator Collins of the world.
05:49And so if you, if there's a corollary in kind of the Senate banking world, which is the committee that has to approve the, you know, the next Fed chair, you know, I think you could see a more, you know, the trend line is more for an orthodox Fed chair versus somebody who's more unorthodox.
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