With Fed and Budget, More to Come from Washington in 2014

The Federal Reserve will take center stage in Washington this week. When it does, the central bank’s Federal Open Market Committee might be tempted to count out Beltway dysfunction as a threat to the economy and therefore a reason to delay a decision to start cutting back on its $85 billion per month in economy-boosting asset purchases.

After all, the Senate seems likely to approve a budget deal that would set spending levels for the next two years and probably eliminate the threat of a government shutdown.

But the Fed—and the rest of America—should probably think again.  The budget deal would certainly be a welcome step away from governing by crisis and could herald a 2014 where the sequester spending cuts are less of a drag on growth. But the deal, should it squeak through the Senate, does not mean Republicans and Democrats in Washington will start toasting marshmallows together and singing “Kumbaya.”


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