News Column

Less Red Ink Means Less Threat of Gov't Shutdown

May 14, 2013

Isaac Cohen --

federal dollars

Several indicators reveal that the next episode of confrontation over the U.S. federal budget will be postponed, because the government is spending less and it is also receiving more revenue. That is, the red ink in the accounts of the government is decreasing.

The expectation was that, given the expiration of the debt ceiling, supposedly by May 19, Congress and the White House would engage in another episode of intense negotiations, similar to what was known by the end of last year as the fiscal cliff.

However, the federal government does not need to request authorization from Congress to increase the borrowing limit until the end of the summer, and perhaps not until Oct. 1. The reason is that the government is spending less in defense and in domestic programs, because of the budget cuts that started in January.

Additionally, revenue is increasing because of higher taxes and payments to the federal government of funds received by rescued financial institutions.

In February, the bipartisan Congressional Budget Office estimated that this fiscal year's federal budget deficit will reach $845 billion, less than the $1.1 trillion in fiscal year 2012.

In this context, it becomes less urgent to negotiate a budget agreement. The immediate threat of a government shutdown has vanished for the time being.

Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.


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