Dubbed the Default Prevention Act, the bill championed by Rep. Paul Ryan is merely a temporary Band-Aid for a gushing wound.
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In late-afternoon trading, the selling pressure eased and the yield settled at 0.601%.
“We’ll see”, Boehner said when asked whether a budget accord was possible. A debt-ceiling crisis has nothing to do directly with controlling government spending. Since Treasury officials are well aware of the dangers of an actual default, and since the Constitution actually forbids defaulting on the debt, debt service always comes first. This can involve shutting down non-essential elements of the federal government.
Letting a default occur to prove a point is economic suicide.
But should we really trust Boehner’s ability to work this out, given the unfolding and almost unprecedented collapse of his speakership?
On Wednesday, Treasury Department Secretary Jack Lew said failure to raise the borrowing limit in time could lead to an economic “accident”. That sounds like a lot of money yet it is less than one day’s worth of government expenses on certain occasions.
“The debt limit needs to be raised”. It would also allow most Republicans to cast symbolic votes against lifting the debt ceiling.
House Republicans are still searching for a plan for raising the debt limit now that a proposal pushed by conservatives does not appear to have enough support and is unlikely to receive a vote this week.
House Speaker John Boehner of Ohio, who is expected to retire at the end of the month if Republicans can elect his successor, has sought to calm talk of potential default.
“By canceling this auction, you’ve raised the issue with Congress. They’re saying, ‘Look, we’re not kidding”.
“Treasury has limited borrowing authority available, and cash and nonmarketable debt forecasts are extremely volatile”. “But until we get the debt ceiling done, I don’t think there’s going to be anything done of a serious nature”.
At this moment it is the short-term dated Treasury instruments that are being impacted by the uncertainty.
Bear in mind that the Freedom Caucus is only 40 members strong, which leaves close to 400 other members of Congress who arent so sanguine about the effects of a debt ceiling breach.
But GOP leaders like Boehner are, for now, resisting Obama’s demands for a straightforward debt increase in the debt that’s free of any add-ons to make the measure more palatable to Republicans. In 2014 the Republicans were faring badly in the polls as it the public perception that they were to blame for the impasse.
Guggenheim analyst Chris Kreuger isnt very optimistic about the debt ceiling getting lifted without a hitch. These spikes will be an excellent buying opportunity as we saw on Monday.
The Treasury said it will still hold auctions for 5-year and 7-year notes next week even though they are also scheduled to settle on November 2. Such a statutory spending cap would encourage lawmakers to prioritize federal spending, enable them to say “no” to special interests, and help to protect American taxpayers from wasteful spending burdens. The record low was 31.70% in 1974. “We’ll call that a start”. But not paying debt is not the same as questioning its validity.
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Many citizens understandably are inured to the various budget crises to which we have been subjected in recent years, and it is easy to conflate a debt ceiling crisis with a government “shutdown”.
