Shutdown #5

My colleague Norm Dempsey reminded me to thank all the readers of our shutdown series for their emails and messages. He also noted we should do the same for those who supported the climate change series. We concur with Norm.

Cumberland Advisors Market Commentary by David Kotok

In his reminder Norm mentioned that when former Illinois governor Rod Blagojevich was sentenced by Judge James B. Zagel to 14 years in prison for extortion and soliciting bribes, the judge pointedly addressed Blagojevich as “governor.”

Zagel explained why: “It serves as a reminder to those of us who vote and those of us who don’t. It reminds the voters of the maxim, ‘The American people always get precisely the government that they deserve.’ Your case is another lesson for us.”

Many readers responded with messages about the phone calls they made to their elected representatives in the House and the Senate during the shutdown period. The country thanks each and every citizen who took a few minutes to raise a voice loudly. We also thank the many folks who worked without pay during the longest shutdown in history. You will be made whole in your paycheck if you are a directly paid federal employee. If your paycheck is earned in an indirect way, your recompense may be problematic.

For the nation the shutdown has a permanent cost. We cannot restore the lost GDP. Example: The worker who went without pay and didn’t take his shirts to a cleaner during those 35 days will now take the shirts to be cleaned and pay the cleaner. But he won’t have taken them twice. The GDP loss in the first quarter of this year will only partially be made up. And that assumes there is not going to be another shutdown.

We also cannot undo the sentiment shift that has further injured Americans’ view of their political leaders. Neither can we expect to restore America’s tarnished image in the geopolitical realm. As the preeminent world power, we acted poorly, and nearly all on the global scene know it. As for our domestic politics, the damage control will be intensive.

John Harwood used his CNBC blog to recite some post-shutdown polling numbers for President Trump. (See “Americans fault Trump for chaotic government shutdown, as more believe US is ‘on the wrong track’: NBC-WSJ poll,” https://www.cnbc.com/2019/01/27/trump-faulted-for-government-shutdown-nbc-wsj-poll.html.) Here are some excerpts that demonstrate the damage.

“The poll’s results showed that by 63 percent to 28 percent , a margin greater than two to one, Americans believe the country is ‘off on the wrong track’ rather than ‘headed in the right direction….

“And by 50 percent to 37 percent, Americans blame Trump, rather than Democrats in Congress, for the debacle. That result reflects their disagreement with his stance on the issue that caused it….

“Pluralities disapprove the president’s handling of border security and immigration issues, and say would-be immigrants across the southern border with Mexico would strengthen rather than weaken America. A 52 percent majority opposes construction of a wall or fence along the U.S.-Mexico border, while 45 percent favor it….

“Underneath that unimpressive showing lies sharply negative assessments of the president. Just one-third of Americans express confidence that Trump has the right goals and policies; an even lower proportion, 28 percent, express confidence that he has the right personal characteristics to be president….

“By 47 percent to 36 percent, Americans rate Trump negatively rather than positively for ‘being a good negotiator,’ the characteristic he has long claimed as his signature quality. He fares even worse on ‘being steady and reliable’ (53 percent negative, 32 percent positive), ‘being knowledgeable and experienced enough’ (54 percent negative, 32 percent positive), ‘being honest and trustworthy’ (58 percent negative, 28 percent positive) and ‘having high personal and ethical standards’ (58 percent negative, 24 percent positive).”

In our view the breaking point was reached when the transportation system failed and particularly when LaGuardia Airport briefly closed to inbound aircraft because of security worries. (See “Flights are not halted at LaGuardia, but the shutdown is now causing flight delays,” https://qz.com/1533829/shutdown-related-faa-staffing-issues-cause-delays-at-laguardia/.)

We close with a reminder that the phone is powerful for messaging a Senator or House Member. All Senators and all House Members own the results of the shutdown, along with the President. This is a multidimensional, bipartisan political failure. The names of the failed leaders include but are not limited to Trump, Pence, McConnell, Pelosi, Hoyer, Schumer, and Durbin.

“Those who are too smart to engage in politics are punished by being governed by those who are dumber,” is an oft-quoted paraphrase of a line penned by Plato in Book I of The Republic. We tip our hat to John Loewenberg for sharing that insight. The thought, which Plato attributes to his teacher, Socrates, can be alternately translated, “One of the penalties for refusing to participate in politics, is that you end up being governed by your inferiors.” (See https://medium.com/@alex_65670/platos-warning-if-you-don-t-vote-you-will-be-governed-by-idiots-64891cd59b4 for a deeper discussion of the quote and its context.) The lesson applies today: We must diligently speak up.

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio


U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


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Shutdown #4

Here is a link to an FBI report on what the shutdown is doing to safety and law enforcement and all that is related to those concerns. The report is entitled Voices from the Field (https://www.fbiaa.org/sites/default/files/downloadable/FBIAA%20Voices%20from%20the%20Field.pdf). The FBI describes it as follows:

Cumberland Advisors Market Commentary by David Kotok

Voices from the Field contains reports from FBI Special Agents nationwide. These stories illustrate how the government shutdown affects our work and identifies the risks that may emerge as it continues….

“FBIAA is releasing Voices from the Field to ensure that Congress, the Administration, and the public are aware of the real and daily challenges faced by FBI agents and the risks to national security posed by a prolonged shutdown.”

The report goes on to detail dozens of highly specific instances where FBI offices across the nation are now prevented from doing their jobs in the areas of counter-intelligence and counter-terrorism, cybersecurity, drug and gang crime, crimes against children, sex trafficking, healthcare and securities fraud, etc.

Richard G. related by email some personal and family history that has a bearing on the FBI’s current predicament. He says,

“My father, long deceased, was an FBI agent. They can make tons more money in the private sector. That’s the reason he retired at 52 years of age and went into the private sector.

“Lots of dedicated government employees are pawns in this charade. We’ll probably lose lots of them to private sector where, if an employee works, companies are required by law to pay them!

“Fingers crossed that some goodwill will come of this ugly period.”

Note we are hearing more and more anecdotes about federal employees who are not getting paid now rethinking their career paths. In nearly every case they are torn between service to the country and escaping this shutdown charade, and they express intense resentment for being used as political pawns.

Let’s not forget the Coast Guard, which is also on duty and protecting the nation while not getting paid – the only branch of the military working without pay. (See “‘Unacceptable’: Coast Guard’s top officer criticizes lack of payment in government shutdown,” https://www.washingtonpost.com/national-security/2019/01/23/unacceptable-coast-guards-top-officer-criticizes-lack-payment-government-shutdown/?utm_term=.8ba96bb4f6fa.)

We note that “Senate Minority Leader Schumer (D-N.Y.) blocked a request to pay the Coast Guard on Thursday after Republicans refused to also open the rest of the federal government” (https://thehill.com/homenews/senate/426824-schumer-blocks-bill-to-pay-coast-guard). Thus the intransigence on both sides continues, and deepens.

We are getting a lot of email about the shutdown. All those who are finger pointing at the other side are wasting effort, in my view. They certainly don’t alter the landscape. It serves no purpose to write to me and tell me I should blame Trump more than Pelosi or that Trump is right and Pelosi is the problem. And it doesn’t help to tell me that the wall is needed or to tell me that the wall is a waste of money.

As a more positive step, I recommended calls to government officials of both parties. I made mine. My message was the same to each of them, regardless of party: “You [congressman or senator] must reopen this government by finding a path to enough votes to do it. You are the responsible party.”

Jay sent a thoughtful note, which I will share:

“What makes all of this the more regrettable is that it turns on $5 billion, ‘chump change’ in the realm of U.S. government accounts. So here’s an idea: suggest that Mr. Trump find the money elsewhere, use it for the wall, and then declare an end to the shutdown, as: (a) enough money will be available to proceed with the wall; (b) he will have circumvented his opponents’ efforts to stop the wall; (c) his opponents will claim, correctly, that they did not yield to Mr. Trump and vote for something they do not like and for which they promised not to vote. The wall, if built, will not stop drug thugs. But if it is patrolled, it will deter some from trying to cross the Sonoran Desert, an often-lethal undertaking, at least during the summer. Walls didn’t save China from the Mongols (mid-1200s) or Manchus (mid-1600s). But these were armed and highly skilled invaders. A wall may focus Mexicans’ attention on their governments’ failures – over many decades – to build public safety institutions. Note the plurals. Mexican leaders’ negligence embitters the lives of Mexicans. This is partly Mexican voters’ fault: they do not punish those who abuse them. Americans do punish those who abuse them: such are not returned to office and may even be imprisoned. One final note: in the present environment, I’d never say to any public official, ‘I will hold youpersonally responsible.’ That could reasonably be construed as a personal threat. Rather, I’d say, ‘I’ll hold you politically responsible and will vote for another candidate, when comes the next election.’”

Thank you to Jay.

Folks. The telephone message to a Congressional Representative or Senator is a way to express your view. It is direct. I leave my name and address. I don’t expect return calls but sometimes get them. More importantly, the call has the strength of a message that shows that you are a constituent who is willing to make an effort, at least for the minute or two it takes to make the call.

Thank you.

U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


 

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Shutdown #3

We believe one of the Achilles heels of the Trump-Pelosi shutdown war is found in air travel. Growing waits at airports. More “blue flu” sick-outs. TSA workers unpaid. And much more.
Cumberland Advisors Market Commentary by David KotokThis is a festering and growing, artificially concocted crisis as our political leaders fiddle and our nation (like ancient Rome) burns.

Trump’s approval is plummeting as two-thirds of the nation’s voters blame him. That emboldens the Pelosi-Schumer side, who seek to sink him. Both sides are now guilty. Each side blames the other as being worse. Meanwhile the USA endures a growing list of bad outcomes.

Citizens have limited power, but the phone still works. Every House member and Senator has local and Washington offices, with phones. The call takes one minute. The message is simple: I hold you (Democrats or Republicans) personally responsible. Stop this ping-pong shutdown crap NOW!

U.S. House of Representatives
https://www.house.gov/representatives

U.S. Senate
https://www.senate.gov/senators/


 

We are reproducing in full below an aviation-related warning that comes from the Association of Flight Attendants-CWA, AFL-CIO.

Air Traffic Controllers, Pilots, Flight Attendants Detail Serious Safety Concerns Due to Shutdown

Washington, D.C. — On Day 33 of the government shutdown, National Air Traffic Controllers Association (NATCA) President Paul Rinaldi, Air Line Pilots Association (ALPA) President Joe DePete, and Association of Flight Attendants-CWA (AFA) President Sara Nelson released the following statement:

“We have a growing concern for the safety and security of our members, our airlines, and the traveling public due to the government shutdown. This is already the longest government shutdown in the history of the United States and there is no end in sight. In our risk averse industry, we cannot even calculate the level of risk currently at play, nor predict the point at which the entire system will break. It is unprecedented.

“Due to the shutdown, air traffic controllers, transportation security officers, safety inspectors, air marshals, federal law enforcement officers, FBI agents, and many other critical workers have been working without pay for over a month. Staffing in our air traffic control facilities is already at a 30-year low and controllers are only able to maintain the system’s efficiency and capacity by working overtime, including 10-hour days and 6-day workweeks at many of our nation’s busiest facilities. Due to the shutdown, the FAA has frozen hiring and shuttered its training academy, so there is no plan in effect to fill the FAA’s critical staffing need. Even if the FAA were hiring, it takes two to four years to become fully facility certified and achieve Certified Professional Controller (CPC) status. Almost 20% of CPCs are eligible to retire today. There are no options to keep these professionals at work without a paycheck when they can no longer afford to support their families. When they elect to retire, the National Airspace System (NAS) will be crippled.

“The situation is changing at a rapid pace. Major airports are already seeing security checkpoint closures, with many more potentially to follow. Safety inspectors and federal cyber security staff are not back on the job at pre-shutdown levels, and those not on furlough are working without pay. Last Saturday, TSA management announced that a growing number of officers cannot come to work due to the financial toll of the shutdown. In addition, we are not confident that system-wide analyses of safety reporting data, which is used to identify and implement corrective actions in order to reduce risks and prevent accidents is 100 percent operational due to reduced FAA resources.

“As union leaders, we find it unconscionable that aviation professionals are being asked to work without pay and in an air safety environment that is deteriorating by the day. To avoid disruption to our aviation system, we urge Congress and the White House to take all necessary steps to end this shutdown immediately.”

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio

Original Press Release: https://www.afacwa.org/air_traffic_controllers_pilots_flight_attendants_detail_serious_safety_concerns_due_to_shutdown


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.