Writing at Fiscal Times, Eric Pianin and Josh Boak present three different ways the shutdown might end. They are

• Pass a stopgap measure that’s tied to budget talks.
• The President bends on the PPACA.
• Implement the Portman plan, a sort of “grand bargain” including a one-year continuing resolution, substantial entitlement cuts, tightening qualifications for subsidies under the PPACA, and tax code reform.

To me only the first of these sounds anything but far-fetched. This despite my impression that the best thing that could happen to the PPACA might be a brief delay. Any of these ways of ending the shutdown presumes that the two sides are actually interested in arriving at an agreement.

In a world in which everyone has their own facts and each side may believe that it’s winning that really doesn’t appear to be the case.

There’s frequently a pretty big discrepancy between what people believe and what they say. There can also be quite a difference between what people believe and what they’d like to think they believe and, even more so, what they’d like you to think they believe.

In the case of the present House of Representatives, fortunately, we have a record of what they believe. Not only do we have the continuing resolution they’ve passed but we also have the 2014 budget they passed.

Budgets are, among other things, statements of intent. In no case has the House passed any form of budget that limits expenditures to revenues. Now, I could do all sorts of analyses of these two pieces of legislation but there’s one thing that’s beyond doubt: the House intends to raise the debt limit. Since they’ve already signalled their willingness to raise the debt limit by passing a budget, refusing to raise the debt limit at this point isn’t even an effective bargaining ploy. It’s just posturing.

I really wish that John Boehner would allow a “clean CR”, i.e. a continuing resolution that funds the PPACA, to come to the floor of the House. If it passes, the will of the people is done. If it doesn’t pass, it removes that talking point from the discussion.

The ideal way for that to happen is if House Democrats could force it to the floor through parliamentary means but I’m skeptical they can bring that about.

I also think there’s an enormous amount of untoward language about the federal government shutdown. Democrats including the president routinely refer to the House Republicans’ actions as “blackmail”, “extortion”, “terrorism”, “arson”, or some variation of one of those. I think the expression they’re looking for is “hard bargaining”. The basic difference is that all of the insults refer to acts that are illegal while what the House is doing is ill-mannered but not illegal.

If what the Republicans in the House are doing were illegal, the president would all but certainly be seeking relief in the courts. That he is not doing so suggests that he recognizes that the House Republicans are engaging in hard bargaining and he’s responding with stump speeches, presumably intended either to sway the public (which does not appear to be working) or prepare the battleground for the 2014 midterm elections.

To the extent that the president’s objections are well-founded the problem is in the structure of our government. Congresses have very little ability to compel future Congresses other than via multi-year appropriations, trust funds, and the like. That’s why bipartisan agreement on major new programs is so vital. The House, Senate, and the president together enact laws but the House identifies the spending priorities. The House has no legal obligation to fund things enacted into law by prior Congresses. What obligations it has in that regard are those of tradition, convention, and civility.

I wish the House weren’t behaving the way it is but I also wish that there were more collegiality and civility in our present public sphere. I very rarely get what I want.

The news media are full of warnings of default. The New York Times proclaims:

Wall Street is showing few signs so far that it is fearing the financial panic it has been predicting should the government default on its debt.

The fiscal impasse in Washington continued to weigh on stock prices on Monday, as the market’s “fear gauge,” the C.B.O.E. volatility index, jumped 15.95 percent to its highest level since June. Nonetheless, the market reaction to date has been muted compared with past crises.

“We all tell ourselves, ‘This is something that is not going to happen,’ ” said David Coard, the head of fixed-income trading at the Williams Capital Group. “This would be like a black swan event — it’s not something that you would have thought that the U.S. could do in a million years.”

But the relative calm on Wall Street is worrying some investors, who fear the markets will not signal to politicians the true danger of hitting the debt ceiling until it is too late.

“The markets are sending this complacent message, and I think the politicians are interpreting it incorrectly and they have no sense of urgency,” said Douglas Kass, the owner of the hedge fund firm Seabreeze Partners Management.

A lot of people are throwing the word “default” around. What does it mean?

In legal terms any omission or failure to do what is expected is a default. From that point of view the United States government is already in default since it’s not open for ordinary business, public employees aren’t being paid for work done after October 1, and other (what we used to regard as) normal, expected operations.

In financial terms default means the failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture. Under that understanding the United States can only default if income does not meet interest obligations which is tens or even hundreds of billions of dollars from the truth or it consciously decides not to make its interest payments on time. That is the case with Argentina, recounted here. Argentina has just refused to pay interest on its debts.

Yet another view of default is that even bringing up the subject is unhinged. The federal government can issue new credit to make any interest payments. Alternatively, the Federal Reserve can buy any new bonds the Treasury might issue that aren’t being bought by anybody else. It amounts to the same thing. Note that foreign governments or companies that obtain dollars in trade don’t have a lot they can do with them other than a) buy bonds, b) buy other U. S. assets, c) buy U. S. goods or d) sell their dollars to someone else.

IMO some of the hysteria surrounding the “debt ceiling” is caused by confusion among these various notions of default. Fiscal superhawks probably thought that the United States defaulted as soon as spending more than was taken in became commonplace. To federal employees what’s going on must now must certainly feel like default. However, technical financial default has not yet occurred and won’t as long as the federal government continues to make interest payments which it can easily do.

That’s not to say the federal government can’t voluntarily decide not to make its interest payments. It’s happened before: once in 1790 and again in 1933.

Get a load of these growth rate predictions from the IMF. This is the sort of thing that gives economics a bad name.

I see that Scott Sumner has recognized something I’ve been saying for years, including on this blog:

The Fed now has a triple mandate:

1. Low inflation.

2. High employment.

3. Minimizing the number of sarcastic comments from Wall Street that might make their lives more embarrassing at cocktail parties with rich people.

However, they’re in the wrong order. #3 is obviously the most important. And it’s not limited to the Federal Reserve.

Buried in a footnote to his post on the possibility of using Social Security reforms as a lever for breaking the impasse over the budget (and the debt ceiling), Bruce Krasting makes an interesting observation:

The “Non Partisan” CBO did not have to make dramatic changes to its mortality assumptions in September of 2013. The 5/13 SS Report to Congress did not have changes in its mortality rates, but CBO did. Why?

That’s an excellent question. Mr. Krasting suggests political motivations. I’d be interested in some alternative but none occurs to me. I’m not even sure how I’d go about finding out.

Here’s the CBO’s explanation. Does that actually answers the question. Why now?

Over at Smithsonian.com there’s a good write-up on the Chicago Fire. Today is the 142nd anniverary of the disaster. If you’re not aware of it, Mrs. O’Leary was very belatedly exonerated for starting the fire.

If somebody asked me (which nobody has), I’d say the real causes of the fire were too many wooden buildings, bad city layout, inadequate city services, and the weather. Without those, working synergistically, the fire which destroyed 2,000 acres of Chicago, would have been contained easily.