There are news releases indicating the possibility of the U.S. government shutting down in October of 2013 because they don't have enough money.(1)(2)(5)(6) The reason for this is because the debt ceiling has to be raised which would allow the government to borrow more money. The truth is that the government ran out of money in May of 2013, but it is using "extraordinary measures" to keep the bills paid until October.(3)(4) What is worse is that both political parties are not proposing something toward getting a budget passed or getting the problem resolved. Apparently, a shutdown is not only possible but is assumed to be likely, and that some bills may not be paid. Does this sound like a real scenario to you? To add insult to injury, this is the third time that the situation has occurred in the last 3 years.(3)(4)
Should you care about this? Is this all a charade or is there a possibility that a shutdown can actually occur? If it does occur, will there not be any consequences from this? Some of the stated consequences include a slowdown in GDP, lower spending and less business investment. If the bills are not being paid, will this not undermine all of the efforts to create a recovery due to so many people relying on the government? If there is such a ruckus over a government strike in a given city, how do you explain this? If the debt is not important, why is it used to justify having to cut spending for real expenses like medical care, pensions and government salaries? There seems to be a large disconnect over what is important and what should be prioritized. Is there a pile of arrogance out there that assumes the U.S. will always pay its bills and this is not an issue at all? If this is true, why is there talk of the government running out of cash? (5)(6)
On the one hand, it sounds about as serious as it gets. On the other hand, politicians don't seem to be very concerned because they have not paid much attention to this issue even though it has been smoldering for years. It is not clear whether to be scared or treat this whole thing as a joke. A tired expression will be used here to express something new: Think outside the debt ceiling and cut spending box. As an example, if a person were not able to pay their bills, would they not buy food, or renegotiate with their creditors to reduce their interest payments?
Sources:
2) http://www.reuters.com/article/2013/09/24/us-usa-fiscal-debt-analysis-idUSBRE98N17S20130924
4) http://www.etfguide.com/commentary/1122/Will-a-Government-Shutdown-Stall-Stocks/
5) http://www.thefiscaltimes.com/Articles/2013/09/25/Scariest-Part-Obama-s-Debt-Ceiling-Warning
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.