July 27, 2011
When describing the Boehner‘s plan as perceived by the CBO we used one key word: “laughable” in that i) it cut far less than many had expected it would cut, particularly during its “first stage” and ii) it had a pathetic $4 billion of actual discretionary cuts in its first projected year. It seems even the GOP has realized that its plan is nothing but a red herring, and as a result has declared that it is delaying its previously scheduled vote on the debt ceiling which was supposed to take place tomorrow, has now been delayed until Thursday after republicans “scrambled Tuesday night to rewrite the measure to ensure that accompanying spending cuts were large enough.” Which means that with far too much action expected int he aftermath, most of which includes the expected voting down in the Senate following just after the House vote, and another vote on a plan proposed by Reid, as well as possibly a vote on Obama’s still non-existent grand compromise, this is no longer an 11th hour affair. The budget farce just became a 12th hour and 1 minute affair. Alas, the money runs out at midnight. What happens next nobody knows, but perhaps Ben Bernanke can tell us: after all it is him everyone looks up to in order to justify never selling on any news, good, bard or otherwise. And he better have a damn good explanation.
From Washington Post:
House members have just seven deals to raise the debt ceiling before next Tuesday’s deadline, and the latest move came after budget analysts said the plan endorsed by Speaker John A. Boehner (R-Ohio) would only create $850 billion in government savings, rather than the sought-after $1.2 trillion.
Boehner had spent much of Tuesday furiously rallying support for his two-step plan to avert a potential default, even though Senate Majority Leader Harry M. Reid declared the proposal “dead on arrival” in his chamber and the White House issued a veto threat.
Senior lawmakers and aides continued negotiations aimed at finding a compromise between competing plans from Boehner and Reid (D-Nev.). But the two sides were still split over whether to hold multiple votes over the next eight months to lift the government’s debt limit or to have just one vote in the next few days that would extend the Treasury’s borrowing authority into 2013. Boehner’s plan calls for linking increases in the debt ceiling in two stages to about $3 trillion in spending cuts.
he White House expressed strong opposition to Boehner’s proposal Tuesday afternoon and threatened a veto, and Boehner also faced misgivings in his own party. About 10 House Republicans publicly declared opposition to his plan as too timid in its restraints on spending, and about nine more suggested they were leaning against the plan. Few, if any, Democrats were expected to support his plan, so the speaker could afford to lose only about two dozen of his 240 House Republicans.
This latest push merely guarantees that a “compromise” plan out of necessity will have to be adopted as there will be “no other options” or at least that is how it will be spun by the GOP. The result will be, just as expected, a plan that has been completely and utterly gutted and who only point is to flick the switch allowing not only another $2.5 trillion in debt to be issued, but the long overdue QE3 to be launched.
Because Bernanke has to monetize something.
In the meantime keep an eye on the dollar and gold. Both are likely, as soon as the market realizes what just happened, to move very fast in opposite directions.
This article was posted: Wednesday, July 27, 2011 at 3:30 am