“There’s been some hard feelings here
About some words that were said …
Remember, one man’s ceiling is another man’s floor.”
Paul Simon
Here we go again. Hold on to your wallets, taxpayers. It’s time for another debt ceiling “negotiation.”
We use the term “negotiation” loosely, as it’s now extinct in Washington.
On one side, we have House Republicans waging an unwinnable battle, saying they’ll agree to suspend the debt ceiling limit for a year in exchange for a one-year delay of the individual mandate for ObamaCare, tax reform, approval of the Keystone pipeline and other concessions. While such changes would potentially provide a huge benefit to the economy, they have zero chance of passing in the Senate, which is controlled by the Democratic majority.
On the other side, we have President Obama and Senate Democrats saying the Republicans are trying to shut down the federal government, because they are not willing to lift the debt ceiling without concessions from the President.
There will be no concessions by the Democrats. As President Obama put it, “I will not negotiate on anything when it comes to the full faith and credit of the United States of America.”
You would think anyone interested in the long-term survival of America would look at the $16.7 trillion debt ceiling and say “enough is enough.” Instead, at least for President Obama and his supporters, the mantra is “it’s never enough.”
It’s not about what’s good for the country. It’s about what’s good for the party. So why negotiate when you can blame Republicans for shutting down the federal government?
That’s why we can negotiate a treaty with Vladimir Putin practically overnight to eliminate chemical weapons from Syria, but we can’t negotiate a reasonable agreement to raise the debt ceiling.
If no agreement is reached, the government will shut down on Tuesday, October 1, when a new fiscal year begins.
“Take it to the limit one more time.”
The Eagles
With the current Congressional standoff, the price of protection against a default on U.S. Treasuries saw its biggest spike in four years, driving credit default swaps up to their highest level in five months.
While the probability of a U.S. default is close to zero, this latest spike recalls the 2011 debt ceiling standoff, which led to a downgrade in the U.S. credit rating by Standard & Poor’s from AAA to AA+, leading to a worldwide stock market plunge amounting to a $6 trillion drop in value.
Even as the U.S. approaches $17 trillion in debt and seeks to go trillions further in debt, it is maintaining its AAA credit rating (except for S&P’s AA+ rating). But will the lack of a debt ceiling agreement lead to another credit rating drop?
It’s unlikely. This month, just in time for the debt ceiling negotiations, the U.S. government filed a $5 billion fraud lawsuit against S&P. S&P says the lawsuit was filed as retaliation for the agency lowering the U.S. credit rating.
Apparently, when President Obama said he would “not negotiate on anything when it comes to the full faith and credit of the United States of America,” he wasn’t kidding.