GG: That alternative is more feasible. Chuck Schumer, the leader of the Democrats in the Senate, rejected the offer of applying the expenditure extension that gave a week or ten more days to negotiate a lasting solution and dodge the “Shutdown.” And one does not observe the usual efforts, the previous effort necessary in both parties, creativity in terms of initiatives, to overcome the collision. And if it is because of the mere inertia, at this point, we go to the inevitable clash.
Q.: What is discussed specifically?
GG: What is most discussed, but it is not the only thing, it is public health spending.
Q.: Are we still arguing the Obamacare?
GG: Democrats ask for an extension of special tax credits linked to the program that the Government rejects. According to Schumer, the official bench is departure, not everyone opposes. But so far it is an insurmountable discrepancy.
Q.: It seems a rather lower theme compared to the consequence of not reaching an agreement. Close the government, even partially, and for a few days, is an important disorder.
GG: Sure. But giving in this bid seems to be politically more expensive yet.
Q.: Isn’t it that Trump deliberately looks for the closure of the government? Senator Fetterman, a Democrat, says that would be ideal to advance with his 2025 project (in reference to the lightning political action plan designed by the Heritage Foundation).
GG: This is playing with fire.
Q.: Trump has already done it other times.
GG: Isn’t it what you are doing today in so many other areas? With tariffs, without going any further. And precisely today, by case, a new batch of sector levies begins to govern. 100% in patented (non -generic) pharmaceutical products, 50% in kitchen cabinets, 25% in trucks. He burned with fire in April and had to rewind reciprocal tariffs. But once he anesthetized the bond market, he returned to the load and now dispatched at ease. If the markets do not alarm, Trump will take risks. I have no doubts.
Q.: How would it be in this case.
GG: Correct. But if the markets then enter an emergency situation, or if public opinion holds it and is openly put against it, it must load with the invoice, which can be very burdensome. Economically and politically. We are all notified.
Q.: The narrower Shutdown in history, 34 days, occurred in 2018-2019 and was in its first presidency. He is not a rookie in these lides. What might interest Trump in the closure of government? Cut out the expense in a way that could be definitive? That is the allusion to the 2025 project, right?
GG: It has been its main club during negotiation with opponents. I will say goodbye to thousands of public employees, I will cut the programs that are most interested. And, incidentally, I will execute what Elon Musk could not do with the Doge agency and the chainsaw.
Q.: You will have to fulfill your threats, it seems.
GG: That is the inertia that already mounted on rails. It can last a few days, and facilitate the subsequent negotiation, after each party showed its people, the most recalcitrant, who defends their flags, that they do not double his arm. With the closure of the government already installed, the negotiating mood of public opinion usually grows fast. Send 750 thousand or 800 public employees to their homes does not go unnoticed. But we can spend a couple of weeks before softening tozudez. And with Trump, which is very aggressive, and that has turned the conventional canons of the administration as an average, we should be prepared for something big. The opposition will not stop it, I do not believe that public opinion either. The agitation of the markets will be its limit.
Q.: Which is still a problem. The bag, in the prelude to Shutdown, closes on the rise. The Dow Jones Industrial, in brand new records.
GG: You have to look at the treasure bonds.
Q.: 4.15%, the ten -year rate is not any contradiction.
GG: The signal of the markets today, I agree, is from Laissez Faire.
Q.: How will the “Shutdown” influence the Fed decision that meets at the end of the month? Can you complicate a rate drop as expected?
GG: If there are “Shutdown”, we will not know the September Employment Report that must be published on Friday. If the closure is prolonged a couple of weeks, the dissemination of consumer and wholesale inflation will also be delayed. It will be necessary to be based on indicators that collects the private sector, and the progress of the activity is going to cloud through the parate, even if it is transitory.
Q.: The Fed, will it remain open?
GG: The Fed, yes.
Q.: Do you think it could resolve delay the expected rates and leave it for December, when all this, predictably, has been regularized?
GG: Like what the Fed privilege today is the health of the labor market, and does so for preventive reasons, I tend to think that it will prefer to alter the order you suggest. Lower the rate in October, and see if necessary, or not, repeat in December. I fear that this is another reason (although secondary) that will incite Trump to fulfill his threats.
Source: Ambito
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