By Kara Odum '16Economics Columnist
The Good: The White House confirmed that Janet Yellen will get the nomination to become the next Federal Reserve Chairman after Ben Bernanke, the current Fed Chairman, steps down at the end of his term. She will be the first female Fed Chairman in the history of the Fed, marking a big step in breaking through the glass ceiling. Yellen is currently the Vice Chairman of the Fed, a position which she has held since Oct. 2010, and has a resume second to none for this position. She has been the president and CEO of the San Francisco Federal Reserve for 6 years and has served as chair of the Council of Economic Advisors, which advises the president on economic matters. Her appointment will likely pass without problems from the Senate and when she becomes Chairman, she will most likely continue running the Fed very similarly to its current operations. She has been a big proponent of keeping interest rates low by using economic tools such as quantitative easing, which are outside the realm of normal Fed activity, and is expected to keep these programs going in order to further bolster the economy.
The Bad: The federal government shut down on Tuesday, Oct. 1 after the House failed to pass a spending bill in time. The fiscal year ended for Congress on Sept. 30 and Obamacare was set to go into effect the next day. The House Republicans tied further spending to defunding Obamacare, which was rejected by a Democrat-controlled Senate and sent back to the House where no deal was reached thus starting the government shutdown. Some immediate effects included shutting down national parks, furloughing non-essential federal workers, and the temporary cease of some FDA food safety operations, and EPA monitoring of air pollution and pesticide use. Longer term consequences include veterans not receiving benefits, the CDC having to halt its flu vaccine program, the Women Infants and Children program shutting down, and disability benefits from the Social Security administration being put on hold.
The Ugly: On Oct. 17, the U.S. will once again hit its debt ceiling, which means the Federal government cannot borrow any more money to support its operations. While many people are oblivious to the effects of a default, the Treasury Department is saying that it would be “catastrophic” for the economy, and with good reason. A default would mean the world’s largest borrower fails to repay its debt, which would devastate stock markets, destroy the dollar, and throw the world into a recession. This probably sounds outlandish and hyperbolic, but make no mistake: a U.S. default would produce a financial apocalypse far surpassing the financial collapse of 2008. Currently, the U.S. debt is at 12 trillion dollars but this time around most people don’t think the U.S. will default, although the chance is no longer zero percent. Most professionals in the industry are not worried that the U.S. will default because Congress will get its act together one way or another to avoid the major fallout, but it’s still an alarming pattern that the legislative branch repeatedly uses the debt ceiling as a political power play. If a deal is reached, it will only postpone the debt ceiling debate for another month or so without any real changes being made.