Posted by Leonard Steinberg on October 1st, 2013

Its official: our beloved government has failed again to reach a compromise in their negotiations mostly focused on Obamacare and a shutdown has resulted. Could this be avoided if we had a viable third party in government? Here are some facts to ponder:

1) The US deficit is actually shrinking (and it is planned to continue doing so, if all goes according to plan). The US deficit tripled following the financial crisis of 2008. However the fiscal deficit is coming back down.  Many Americans quite wrongly believe that the explosion of debt is out of control and is like a runaway freight train than is gathering more and more speed as every day passes. The reality is quite different. The US national debt (which is up almost 80% in 8 years)is set to stabilize and is set to plateau later this decade at around $20 trillion. This is because the economy IS recovering, proven by rising tax receipts (which are the cause of the diminishing deficit year on year). We should avoid new financial commitments, focus on growth, and finance the commitments we already have.

Year        deficit          debt

2005…..$ 318 bn…..$ 9,620 bn..
2006…..$ 248 bn…..$ 9,867 bn..
2007…..$ 161 bn…..$ 10,029 bn..
2008…..$ 458 bn…..$ 10,487 bn..
2009…..$ 1,413 bn…..$ 11,900 bn..
2010…..$ 1,294 bn…..$ 13,500 bn..
2011…..$ 1,300 bn…..$ 14,800 bn..
2012…..$ 1,087 bn…..$ 16,100 bn..
2013…..$ 973 bn…..$ 17,200 bn..
2014…..$ 744 bn…..$ 18,200 bn.. (projected)
2015…..$ 577 bn…..$ 18,944 bn.. (projected)

2)  Where is the money? Well, 15% of our GDP goes to the military, spending trillions on weaponry and an army that makes every politician look strong and mighty: Those pesky wars cost us several trillion dollars. In the UK they spend 9.3% of GDP on healthcare and their life expectancy is 80.2 years. In the US we spend 17.9% of GDP on healthcare and life expectancy is 78.8. Are all corporations paying their fair share of taxes or are they bilking the system by keeping trillions out of the USA to avoid taxation…legally? Our beloved government practically doubled the public debt, whilst printing trillions of dollars, and still have a $ 1 trillion per year deficit.

3) During the partial government shutdown, many essential government operations will cease. Internal Revenue Service call centers will close and more than 90 percent of Environmental Protection Agency workers will stay home. National parks and museums will be shuttered. Other services will continue uninterrupted. Social Security and Medicare benefits will be paid. U.S. troops will remain at their posts around the world and will be paid under a bill Obama signed yesterday. Air-traffic controllers and airport security screeners will keep working.

4) 800,000 government workers will stop working (Were they really working that hard to begin with?).  Anyone who thinks 535 (career) politicians from a 2-party system can act in a fiscally-responsible way to solve this nation’s economic troubles should think again……..now if we had a third party, all of this would be VERY different.

5)  How will this shutdown impact Real Estate? It will mostly impact the mortgage area, depending on how long the shutdown lasts: loans can’t close without the income tax transcripts, a requirement put in place after the mortgage crisis in an effort to fight fraud.  The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, insures home loans for low- and middle-income and first-time home buyers.  HUD said in a contingency plan this week that the agency would continue to endorse new home loans in the event of a hiatus, although with a drastically reduced staff in the housing office. Borrowers seeking loans guaranteed by Fannie Mae and Freddie Mac, which together own or guarantee nearly half of all U.S. mortgages, will see business as usual.

Next crisis:  the debt ceiling just 2 weeks away. And that one is more important.