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The U.S. government avoids a shutdown but the funding bill will perpetuate inflation


The U.S. government avoided a shutdown on September 30, 2023, when Congress passed a short-term funding bill and President Biden signed it into law. The bill keeps the government funded at existing levels through November 17, 2023.

What’s a government shutdown? A government shutdown is a period of time when the federal government of the United States is not operating due to a lack of funding. This happens when Congress fails to pass a budget bill or other funding legislation before the start of a new fiscal year. The U.S. government was about to have a shutdown on September 30, 2023, because Congress failed to pass a full government funding bill before the start of the new fiscal year.

There are a few reasons why Congress failed to pass a funding bill. One reason is that Democrats and Republicans are divided on a number of issues, including spending levels and policy priorities. This makes it difficult for them to agree on a budget bill. The other reason is that the Republican-controlled House of Representatives has been unwilling to pass a funding bill that includes additional funding for Ukraine. Republicans have argued that the Biden administration has already sent enough aid to Ukraine, and that they want to focus on other priorities. Democrats, on the other hand, have pushed for a funding bill that includes more money for Ukraine, as well as for other domestic programs. They have also argued that a government shutdown would be harmful to the economy and to Americans who rely on government services.

The passage of the bill came after weeks of negotiations between Democrats and Republicans. Democrats had been pushing for a bill that included additional funding for Ukraine, but Republicans had resisted those efforts. In the end, the two sides agreed to a bill that did not include any new aid for Ukraine. The total cost of the 45-day funding bill is approximately $450 billion. This includes funding for all federal agencies and departments, as well as for mandatory spending programs such as Social Security and Medicare.

Economists argue that the 45-day funding bill is unlikely to have a significant impact on inflation in the short term as it simply keeps the government funded at existing levels, so it does not introduce any new spending into the economy. But it will have important effects on inflation in the long-term.

This is hundreds of billions of dollars added to the national debt, which is already at $33 trillion. This short-term bill will keep increasing inflation because the Federal Reserve loaned another astronomical amount to the federal government. This loan will make the cost of borrowing even higher for everything else since another loan issued implies keeping interest rates high. Indeed, this loan made to the government will necessarily increase the amount of money in circulation and put upward pressures on prices, while wages do not grow as fast, in the long-term.

While many see the passage of the 45-day funding bill is seen as a relief, this bill will cause more harm to the U.S. economy in the long-term because this is more money injected into the economy, which will continue to erode the purchasing power of ordinary Americans and keep inflationary pressures high.

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