harvey irma tax reform

House Passes Harvey Aid Package As Irma Approaches


Final update: 

The can has been kicked on the debt ceiling (see here)

Updated with the latest headlines:


Now we’ll see if the Senate moves to attach the debt ceiling to the bill.


With FEMA expected to run out of money by Friday and as Hurricane Irma barrels towards Florida, the clock is ticking for U.S. lawmakers.

Faced with a dizzying array of issues that includes the debt ceiling and a CR, Congress needs to act now or risk being blamed for dithering in the face of twin natural disasters.

Of course the default option (pun fully intended) is to tie to the debt ceiling to disaster relief. That’s a shameless end-around in terms of what it says about lawmakers’ inability to get anything done in the absence of a catastrophe, but at this point, markets will take what they can get. Yesterday’s 4-week bill auction proves how nervous folks are getting.

“The latest four-week bill auction was arguably the scariest since the lead-up to the 2008 crisis, underscoring just how concerned investors are that President Donald Trump and Congress will fail to resolve cleanly the regular debt-ceiling jeopardy that the U.S. seems locked into,” Bloomberg’s Garfield Reynolds wrote overnight, adding that “even in 2013, when the battle between President Barrack Obama and Republican lawmakers led to a partial government shutdown, 4week bill rates at auction only got as close as 3 bps below 2-yr yields.”

Well now, Republicans are apparently going to try and simply suspend the debt limit altogether. “House Republicans are working to advance emergency funds for Hurricane Harvey this week while Senate GOP leaders may add a debt limit suspension to the measure when it reaches their chamber,” the ubiquitous “people familiar with the discussions” tell Bloomberg.

Still, the outcome here is far from certain even as the outcome of Hurricane Harvey is in fact very certain given the fact that it’s already happened. So you know, there’s that – and it’s something Congress might want to consider as they wrangle over political points.

Meanwhile, Goldman is out with their latest take on all of this. The bank’s view is that while the near-term risks (so, the tail risks) have been reduced thanks to the sheer urgency of the situation, the medium-term risks have now grown.

“Some of the near-term fiscal deadlines, like the debt limit, are likely to be addressed as part of hurricane relief, which should reduce the perceived level of risk in financial markets regarding these upcoming deadlines,” Goldman writes, in a note out this morning. “At the same time, the focus on hurricane relief could present additional obstacles for tax reform while slightly boosting the prospects for passage of new infrastructure financing tools,” the bank continues, before cautioning that “we do not expect either of these to be enacted before year-end [as] tax reform has only a slightly better than even chance of enactment in 2018 and a shift in attention toward other issues such as hurricane relief could reduce the probability further.”

Here’s a bit more color on the FEMA situation and relief funding more generally:

Relief funding often passes soon after a major storm hits; it took Congress only three days after Hurricane Katrina to make an initial appropriation of funds, for example. This is partly out of necessity, as disaster relief funds start being drawn quickly, as shown in the left panel of Exhibit 3. However, while an initial round of funds is often approved quickly, the full extent of federal assistance can take several rounds of legislation, often spread over several years. The right panel of Exhibit 3 shows the cumulative resources appropriated to the Federal Emergency Management Agency (FEMA) for Hurricanes Katrina, Rita, and Wilma, which occurred in 2005, and the amounts spent out of those appropriations. All told, Congress enacted at least 9 bills with Katrina-related funding over the five years following Katrina. The upshot is that, while Congress often acts quickly on initial funding, additional installments take time as does the actual spending that occurs as a result of these funds.


So there will be more fights over additional tranches of disaster relief, and lawmakers on both sides of the aisle will almost invariably use that relief as leverage in future negotiations over the spending authority, the border wall, and yes, even DACA.

Just to drive the point home, we’ll leave you with a Venn diagram from Goldman because if there’s anything that screams “this is FUBAR!” it’s a Venn diagram.



2 comments on “House Passes Harvey Aid Package As Irma Approaches

  1. Right, so when Sandy did it’s dirty work the Republicans, following their then existing “conservative convictions,” of everybody should take care of themselves, we are a go it alone nation, we don’t believe in taxes for health care or welfare but we do-do believe in it for military-care and not on our corporate-care constituency, fervently opposed Sandy relief even after supporting disaster aid for their own home states. Now the shoe is on the other foot, Republicans are raiding the cash stash and do we see Democrats fervently opposing red-state Harvey relief or do you expect them to opposed red-state Irma relief to even the score? Not a chance. At their core, Democrats care about people. At their core, Republicans care about wallets. Sure, I agree Democrats like the buck as well, but at their heart, their constituency and the issues they care about are people. Not the “fine” protesting people in Charlottesville either.

    So, Harvey, Irma, Debt Ceiling, Koreas, Trump, DACA, Nazis, KKK, White Supremacists, – It’s FUBAR!

    “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

  2. Curt A Tyner

    Marty great post. I’m going to have to defer to my all time fav best acronym “SNAFU” used many times in the past by friends and comrades. The normalization of control of everything in our lives from “algo’s” that react to all markets and bend the curve of fair to levels beyond belief, to central and “humongous” banks that bleed the entire planet’s population, taking just enough blood each time to keep the farce alive. So to me yes we have normalized “all fu*ked up”

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