There’s nothing like a deadline to inspire action, so finally on Wednesday, Congress voted to raise the debt ceiling so that the federal government doesn’t default on existing obligations, and end the partial shutdown of government operations. The move wasn’t precisely a long-term fix, however. The new debt ceiling will probably be hit on Feb 7, and if there’s another closure of the government, it will be on Jan. 15.
The Senate voted for the measure by a lopsided 81-18, while a few hours later, the House of Representatives approved it by 285 to 144. President Obama signed the bill just after midnight on Thursday. Federal government workers who were furloughed were set to return to work on Thursday morning. The cost of the entire episode is still being tabulated.
Under the agreement, both chambers are directed to hold meetings about tax policy and spending levels in short order. Supposedly they’re to reach some kind of agreement by Dec. 13, but if previous patterns re-assert themselves, it’s unlikely that any kind of broader agreement will emerge. So it’s possible that the parties will once again be at odds over funding government operations and even the debt ceiling come early 2014, though fresh memories of the recent shutdown might make Congress avoid repeating itself quite so soon.
Growth still modest: Beige Book
Also on Wednesday, the Federal Reserve released the latest Beige Book, an anecdotal compendium of economic sentiment from the 12 Federal Reserve districts. Reports from the districts suggest, the book says, that national economic activity continued to expand at a “modest to moderate pace” during the reporting period of September through early October. That’s not bad, but not much different than before.
Eight Districts reported similar growth rates in economic activity as the previous reporting period, while growth slowed some in the Philadelphia, Richmond, Chicago and Kansas City Districts. Most respondents remained cautiously optimistic in their outlook for future economic activity, though many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling fracas.
Construction and real estate activity continued to improve in September. Residential construction increased moderately on balance, the Beige Book noted, growing at a stronger pace in the Minneapolis and Dallas Districts but only slightly in Richmond and Philadelphia. Multifamily construction remained stronger than single-family construction in a number of places. Nonresidential construction activity remained modest, but varied by market. Growth was strong in the Minneapolis District, but up only slightly in Richmond, Atlanta and Philadelphia.
When it became apparent on Wednesday that Congress was going to act, Wall Street had a good day. The Dow Jones Industrial Average gained a whopping 205.82 points, or 1.36 percent, while the S&P 500 was up 1.38 percent and the Nasdaq advanced 1.14 percent.