It could be a false sense of security because the deficit has fallen so much this year already, from 7.2% of GDP last year to only 4.2% this year.  Republicans can pat themselves on their back for sequestration that reduced spending by 2.9%.  Democrats can pat themselves on their back for the higher payroll tax, plus their good luck that Fannie & Freddie repaid more of their bailout debt than expected.

But, that is very short-term thinking.  The present value of our future spending on entitlements has not been restrained . . . or even discussed.  Sequestration and small tax increases are impotent in the face of the entitlement burden.  Is anybody discussing this?

I know, I know . . . it is the dog days of summer, when everybody is on the beach, but this is important.  A government shutdown will absolutely decrease GDP.  The longer it is shutdown, the bigger the damage to GDP.

I’m suspicious “the fix is in,” meaning there is some understanding a shutdown will be avoided by postponing any resolution or decision now.  When that becomes apparent, there will be a brief market rally.  If there was a “grand bargain,” there would be a strong bull run, very strong indeed!  But, that won’t happen.

The dogs need to get off the beach, get back to Washington, and start barking at each other, please!