Sequester Is Not The Issue

Where the Washington circus of clowns goes from here is completely unclear, but it does appear that Obama may have overplayed his hand and the bluff did not work.  Republicans did not fold because it became clear that Armageddon has not descended upon the earth, and life will go on. It also became known that it was Obama who actually proposed what he now calls a stupid idea, and Woodward made it clear that it is Obama who is retrading the deal. Now that it has come out that the White House has been intimidating the press, and not only Woodward, the White House credibility is even weaker. Almost everyone knows that there is surely plenty of places to cut spending with no impact at all, other than releasing illegal aliens into the streets of Arizona, and making everyone wait on longer lines at the airport. It is also clear that the White House will force agencies to find the most painful way to implement sequester, to make certain the public suffers to the maximum possible limit. This White House will do anything and say anything to win its political point, but it may have reached a point that is could become counter-productive for them. It is so typical that Chuck Schumer excortiated the Republicans for not wanting to pass the entire $60 billion of Sandy pork package with at least $25 billion of non Sandy waste, and now he is demanding more taxes and saying there is no place to cut spending other than TSA, day care and defense. This week the General Accounting Office identified $115 billion of improper or over payments to contractors and others in the past year. The list of waste is endless. If they really wanted to cut spending and not raise taxes, it is easy, and far more than $85 billion.

The point for CRE is the uncertainty of where from here, the attack on carried interest taxation, potential space reductions, and other cuts to make everyone’s life miserable. If you have a lease which is dependant on annual or periodic appropriation, you might have more risk than you expected. You might have delays in collecting rent. Lease renewals may not occur or may be negotiated harder or later. Just getting paid on routine maintenance or similar contracts may slow down. In defense, most new contracts are on hold for who knows how long. It is unlikely most GSA leases or contracts will get signed until all of this is resolved. In short, the next several weeks, or maybe months is completely uncertain if you are dealing with a federal agency.