I'm sure everyone has heard that a resolution (of sorts) has been achieved on the debt crisis afflicting the US right now.
Quick thread to garner people's thoughts on it.
Saw this great article which kinda summed up the proposal to me.
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The House vote will be tight, all eyes on that. Even with S&P softening up their language around the downgrade, that risk will remain in the pipeline, especially if the budget committee the bill proposes to create fails to work the way it should.
Need a total of 216 votes to pass: 120 Republican votes (half of the Republicans) 96 Democrat votes (96 out of 193 total)
Visible de-risking in the overnight repo market, as well as widening FMOC on stand by to provide liquidity for money market funds Given the bill passes Congress, much of the money market stress should be aleviated...not all of it though. Haircuts and borrowing rates should remain low.
EDIT
These are just notes related to my sector from one of the calls. Hope the others will complete the picture.
It may be over for now, but the US debt issue is far from dead. Politicians just want it covered up until after the next election. I'm not up to date on the exact specifics, but I believe it's something like $2t of spending cuts for a $14t debt? A drop in the ocean.
Most of the western world is in the uncomfortable position of just coming through a recession AND having massive levels of debt. For the US, although I agree with the policy, I don't think Obamas healthcare reforms are affordable right now.
Can't remember the source but read somewhere that of the total $14t, something like 9 of it has come under Bush and Obama through social welfare spending and wars/defence. America has a lot of fat to cut and needs to get a grip on it's debt level fast.
This. Cut back on military spending. Do we really need bases all across Europe? No. Trim back healthcare and phase out SS over the next 20-30 years. Just that alone would cut out trillions of actual cuts, not a decrease in the future spending increases.
In the beginning both parties were adamant of not raising the deficit ceiling... in the end they raise the deficit ceiling. Deficit spending is going to increase no matter what they do. This problem will just re-emerge again in the future; hopefully when our economy is in slightly better shape.
Just another example of the age-old strategy of kicking the can down the road.
Republican leadership coming out in support.
This vote is a huge unknown but I don't think any member of congress is THAT stupid.
Democratic thumbs down= welfare checks don't get mailed out. Republican thumbs down= markets crash, America's borrowing costs go up.
I suspect Nancy Pelosi is engaging in last-minute gamesmanship to try and get as many Republicans to vote for this as possible. If Nancy thinks this is a bad compromise, any Republican will be more inclined to vote for it.
I expect this to pass the house by 3-5 votes. Everyone wants to vote against it to show their constituencies how much they hate it, but in reality, the alternative is much worse.
Has anyone been counting the votes in the Senate? Remember that some Senators are going to try to force them to invoke cloture, and we may need 60 votes.
All said, I think this is a solid compromise, particularly for the more moderate Reagan republicans who have been waiting 30 years for the equation on less taxes->less spending to balance out. I'd have liked to have seen some more significant medicare/medicaid cuts along with some reform on tax loopholes (revenues), but we'll probably get that done next year. Depending on who controls the HOR/Senate, we'll either see more cuts or more revenues, but an increase in the deficit looks unlikely at this point.
The Titanic is sinking and we're rearranging deck chairs...
Sorry, couldn't resist the Colbert reference.
What crisis? There was never a crisis...just Obama fear-mongering. We won't pay this, we will default...all BS. We would have paid our debts and 70% of other spending. The real "debt crisis" will be in a few years when we are downgraded to junk and no one will buy our bonds. Unless we fix this, that's the road we are heading towards.
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