By Nancy Drapeau, PRC
Research Director, CEIR
I was at the Bloomberg Markets 50 Summit in NYC this past Tuesday. It was excellent, providing macro views and insights into market behaviors and the economy in general.
Attending this event made me realize how efficient and productive the CEIR Predict Program Committee was in delivering content for C-level executives of exhibitions to help prepare their business strategies and to position their events for success in light of current and near-term market conditions. It also offered insights for the investment community, for those interested in evaluating whether an exhibition property acquisition is a fit for their organizations.
At the Bloomberg event, Treasury Secretary Jacob Lew was the closing speaker. Commentary that caught my attention relates to the impending debt ceiling crisis. Secretary Lew noted that by mid-October, the U.S. government will hit its borrowing limits and will be left with cash only. In a report to Congress a couple of weeks ago he estimated that cash available was approximately $50 billion; however, yesterday he noted that revenues have come in slower and thus the government’s cash position is under $50 billion. The bottom line is that the U.S. government at that moment will not be able to pay all its bills.
Though the government has ‘shutdown’ due to failure to appropriate funds for government budgets in the past, it has never hit the debt ceiling, though it certainly flirted with this possibility in 2011. What a risky way to make history.
Secretary Lew explained that a formal debt ceiling was first established 1917. This action was taken so Congress did not have to approve each request for borrowing, as it had to do prior to passing this law. De facto, today, looks like we are dealing with the challenges experienced by Congress prior to 1917. Well, it is even worse than in 1917. The budget process is already byzantine. It requires setting a budget and then approving appropriations to fund what was approved. Now that we keep running into the debt ceiling, it is a three step process. This is a bit impossible for a Congress that has challenges coming to consensus on most things.
It is a very unfortunate moment if Congress and the president cannot raise the debt ceiling and move on and resolve its differences on spending challenges and philosophies in the normal budgeting process. It will give a black eye to the U.S. government’s reputation of paying its bills.
If this crisis lasts awhile, it will have an impact on the economy and thus the exhibition industry. Thankfully CEIR’s economists closely monitor what happens in Washington, D.C., and the models that are used to forecast the outlook of the overall exhibition industry. They offer two scenarios, one where gridlock in Washington, D.C. continues and one where it is resolved. For those interested in the CEIR Index, visit it by clicking here.
Access to the video interview with Secretary Lew is available by clicking here.