Debt Ceiling Breach Within Days, DC Circus Comes Home

Just when you thought the circus had left Washington comes the news that the United States is within days of breaching the statutory debt ceiling. Last summer’s political debacle that led the the debt ceiling deal and the downgraded of the US triple-A debt rating set up a process tin which President Obama could raise the ceiling in a series of tranches. Never ones to miss an opportunity to be on TV, Congress put a provision in the bill that gives them an opportunity to symbolically disapprove of the raise. It is a meaningless vote, but gives them the opportunity to talk about how the National Endowment for the Arts is such a drain fiscally.

Congress asked the President to delay the raise until they return from holiday recess. In granting them their request, President Obama will force the treasury to use accounting procedures to keep the government functioning until the next raise to the limit is approved. In simple terms it means they raid other budgets for cash such as retirement programs. They are promptly given an IOU that will be paid off with bond sales once the limit is raised.

Over the next few days you will hear every Senator and Representative shout from the floor that a vote to raise the debt ceiling enables reckless spending. In reality a vote no on the debt ceiling would be equivalent to a household deciding which three out of five credit cards they will pay for the month. The reckless spending came when they maxed out the five cards at Macy’s over Christmas. Or in the case of Congress, the giant omnibus appropriations bills. You know the type of bills they stuff the bridges to nowhere in. If they were serious about spending they would focus on those bills, not the debt ceiling.

For the next week you will hear a lot of posturing geared for the election cycle. And that’s all it is. Even the die-hard tea party rep. in his second year in the house really doesn’t want to do anything. Why? Because the reality of the balancing the budget is you cut so hard it shatters the economy or you do a balanced approach which involves taxes. Yeah. Taxes. So in other words, that’s not going to happen. We get a week of political wranglings followed by the premiere of American Idol. At least we have the bases covered.

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About Danny Fisher

Danny is the old hat at Active Investor. One of the been around the block a few times traders, his main focus is on overall market conditions. Be it some new merger talk or Washington being Washington, you can expect Danny will be on top of it.

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