Substantive talks between President Obama and Republican leaders have yet to get off the ground because of uncertainty over who will succeed Speaker John Boehner (R-Ohio) and what can pass the lower chamber.
It became more clear Monday, however, that any proposal to raise the debt ceiling without major fiscal reforms will not pass the House without Democratic votes.
That means Boehner or his successor will either have to give in to Democratic demands for a clean debt-limit increase or face the wrath of conservatives who have roiled leadership races in the House.
Pricing Treasuries was already tough at a time of rising worries about US economic growth and confusion about how or if the Fed might respond via monetary policy. But now there’s a third factor to consider and it’s safe to say that more isn’t better on this front.
“Just think about it, we have a government of the United States, a $4-trillion-a-year enterprise, where swings of a few billion dollars can determine whether or not you have enough cash to pay your bills,” Lew said yesterday. “It’s ridiculous. The debt limit needs to be raised.”
Fiscal sanity, alas, is in short supply within the Beltway… again, which implies that Congress is inclined to hand out tricks rather than treats, short of an attitude transplant under a certain white-domed building just east of the Potomac.
Lest you think all of this is forced upon Congress to reign in a runaway deficit, think again. The federal budget deficit as a percentage of the economy has fallen to the lowest level since 2007.
In short, a shocking disclosure: it’s all about politics.
James Picerno is the editor of CapitalSpectator.com – read more