Two New Factors Raise Threat of Government Shutdown

Plus: 'Doctors make more than anyone thought' ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Happy Monday! President Joe Biden is heading out west tonight ahead of events Tuesday and Wednesday highlighting the economy, the Inflation Reduction Act and investments in climate and clean energy. Also coming up this week: A new reading on the consumer price index measure of inflation is due Thursday, with economists expecting a slight acceleration of price increases for the first time since June 2022. Here's what else is happening. Two New Factors Raise the Threat of a Government Shutdown When Congress returns to the Capitol next month, lawmakers will have precious little time to try to avoid a government shutdown once current funding runs out after September 30. The likelihood of a shutdown appears to be high given the status of the 12 annual spending bills — the House has passed one, the Senate none — and, more critically, the differences between the two chambers’ proposed spending levels. The Democratic-controlled Senate is looking to set spending at the level of caps agreed to as part of the deal to raise the debt limit enacted in June. The Republican-controlled House, driven by conservative anger over that deal, is looking for deeper spending cuts. The chances of a shutdown and a more prolonged fiscal showdown may have been raised further by two recent developments. The first is the Fitch Ratings downgrade of U.S. credit, which cited the government’s fiscal outlook as well as lawmakers’ repeated political brinkmanship over the federal budget and national debt. The second is the indictment of former President Donald Trump. The downgrade “has emboldened Republicans to call on President Joe Biden and congressional Democrats to yield to their demands for fresh spending cuts,” Erik Wasson and Edward Harrison of Bloomberg News [report](. The federal charges against Trump have complicated the picture, clouding the chances for a spending agreement or even a stopgap measure to keep the lights on at federal agencies. “House Republicans are governed by a small band of far-right conservatives who traditionally hate such short-term continuing resolutions, as the measures are known on Capitol Hill,” The Washington Post’s Paul Kane [wrote]( over the weekend. “And the most recent charges against former president Donald Trump have angered those lawmakers, some of whom are threatening to block any bill that provides funding to the Justice Department unless they get to chisel away at money that in any way contributes to special counsel Jack Smith’s investigations.” Kane notes that prominent House Republicans have been highly critical of the Justice Department and the FBI and that GOP lawmakers “will be under enormous pressure from that far-right flank and outside activists to keep the government open only if Smith’s investigation is essentially shut down.” That puts Republicans on a collision course with Democrats and raises the chances of an October shutdown — and if lawmakers then can’t complete the 12 annual spending bills by January 1, 2024, all federal agencies could face a budget cut. “By the end of April, if there’s still no resolution to all the 2024 funding bills, every agency must administer a 1 percent reduction in a fairly painful way: a full year’s worth of cuts hitting in just the final five months of the fiscal year,” Kane explains. Lobbyists think a shutdown is coming: A new survey of “K Street leaders” — aka lobbyists — by [Punchbowl News]( and the Canvass finds that 65% think the government will shut down on October 1 and 80% think there will be a shutdown by January. Why it matters: “A series of bad steps seems to be set up to unfold,” Kane says: “Some form of government shutdown in October; more battles in the early winter over some legislation; and finally, in the early spring, if there’s no resolution to funding the Justice Department, every agency being hit with an across-the-board cut.” In the meantime, a lengthy shutdown would also complicate the Federal Reserve’s decisions regarding interest rates and the economy. “It could lead to the Fed potentially missing a Fall pivot point,” Gennadiy Goldberg, senior U.S. rate strategist at TD Securities, told Bloomberg, which notes that Goldman Sachs projected recently that a shutdown would likely cut 0.2 percentage points from gross domestic product for each week it lasts. Quote of the Day: A Reason for Optimism on Inflation “Our baseline forecast suggests that year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024. This would represent a sharp turnaround in shelter inflation, with important implications for the behavior of overall inflation.” San Francisco Fed economists Augustus Kmetz, Schuyler Louie and John Mondragon, indicating in a [research note]( published Monday that “the housing market has slowed significantly with the rise in interest rates” and that shelter inflation, the largest component of the consumer price index, is likely to slow or even turn negative over the next 18 months. (h/t [Bloomberg]( Number of the Day: $350,000 The average medical doctor in the U.S. earns $350,000 a year, according to a recently updated [analysis]( published by the National Bureau of Economic Research. Many specialists earn two or three times that amount, and top doctors in some fields can earn as much as 10 times more. The income figure, based on an analysis of more than 10 million tax records from nearly 1 million doctors over 13 years, indicates that American doctors earn more than most researchers had previously estimated, says The Washington Post’s Andrew Van Dam. “By accounting for all streams of income, they revealed that doctors make more than anyone thought — and more than any other occupation we’ve measured,” he [writes](. “In the prime earning years of 40 to 55, the average physician made $405,000 in 2017 — almost all of it (94 percent) from wages. Doctors in the top 10 percent averaged $1.3 million. And those in the top 1 percent averaged an astounding $4 million, though most of that (85 percent) came from business income or capital gains.” The data raise some potentially difficult questions about why doctors earn so much, and how their extraordinary incomes affect the overall health care system. One factor likely influencing their pay is the high cost of medical education, which pushes more young doctors into higher-paying specialties like orthopedic surgery and dermatology rather than lower-paying — but socially essential — areas such as family care and preventative medicine. Another factor is the decline in the number of doctors relative to the population over the last few decades. The U.S. ranks 27th out of 31 nations in the Organization for Economic Cooperation and Development when it comes to the number of doctors per 10,000 residents — and dead last when looking only at the number of generalists. Whatever the cause, it’s clear that American doctors earn more than they did in the past, and far more than those in other industrialized countries. “In general, U.S. physicians are making about 50 percent more than German physicians and about more than twice as much as U.K. physicians,” one medical researcher told Van Dam. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- Fiscal News Roundup - [Biden Goes West to Tout the Economy as Trump Charges Seize Attention]( – Washington Post - [US Government Shutdown Threat Builds in Post-Downgrade Fallout]( – Bloomberg - [Bidenomics Boosts US Economy, Fanning Soft-Landing Hopes, Inflation Fears]( – Bloomberg - [A Fed Official Wonders: ‘Do We Need to Do Another Rate Increase?’]( – New York Times - [US Will Have to Write Off Billions in Student Debt Due to Deaths]( – Bloomberg - [Red States’ Revenge Evident in House Earmarks Distribution]( – Roll Call - [Billions for Clean Energy Caught in a Partisan Tug of War]( – Roll Call - [Schumer Wields Political Heft in Bid for New York Chips Funds]( – New York Times - [Pentagon Withholds Payments of $7 Million a Piece on Upgraded Lockheed F-35s]( – Bloomberg - [Attacks at US Medical Centers Show Why Health Care Is One of the Nation’s Most Violent Fields]( – Associated Press - [U.S. Lab Says It Repeated Fusion Energy Feat — With Higher Yield]( – Washington Post Views and Analysis - [Trump Indictments Add to Pressure on Government Funding Bills]( – Paul Kane, Washington Post - [Debunking 5 Republican Arguments Against the Global Minimum Tax]( – Natasha Sarin and Kimberly Clausing, Washington Post - [What US Treasury Volatility Means for the Economy]( – Mohamed A. El-Erian, Bloomberg - [Take Fitch's Downgrade of the US Seriously, Not Literally]( – Karl W. Smith, Bloomberg - [The Republican Party’s Split on Economics]( – David Leonhardt, New York Times - [How Long Will Interest Rates Stay High?]( – Jeanna Smialek, New York Times - [Buybacks Are Down, Production Is Up]( – Harold Meyerson, American Prospect - [A Fiscal Crisis Awaits. Here’s a Provocative Idea for Heading It Off]( – George F. Will, Washington Post - [Is a U.S. Debt Crisis Looming? Is it Even Possible?]( – Paul Krugman, New York Times - [The US Economy Is Great. Stop Worrying About It]( – Tyler Cowen, Bloomberg - [Republicans Who Fought Biden’s Agenda Now Claim Credit for It]( – Dana Milbank, Washington Post - [How Western Media Would Cover U.S. Credit Woes, if They Happened Elsewhere]( – Karen Attiah, Washington Post Copyright © 2023 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](