You Gotta Know When To Fold Them. . .
In politics as in poker, you have to know when to hold them, know when to fold them, know when to walk away and know when to run. House Republicans conceded defeat and declared victory yesterday passing a bill that the Senate is expected to act on that extends the Government’s power to borrow money to fund its $16.4 trillion deficit until May 19th. Since the Treasury has the ability to finance the debt using emergency measures, this means at the very least that we won’t see another game of debt ceiling-chicken until at least next summer.
For anyone who believes that an economy needs fiscal stability to maximize growth, the development is a welcome one, but don’t get confused, there are still plenty of battles on the horizon. Most importantly, if Congress and the President can’t agree on an alternative deficit reduction plan by March 1, sequestration takes effect. This basically means that $1.2 billion in spending gets cut (half from the military budget, the other from domestic programs). The agreement reached between the President and Congress in early January simply put off the sequestration deadline while agreeing to permanently extend tax rates that were set to expire and raise the rate on certain high income earners. There was an interesting piece in the National Journal this morning arguing that sequestration, once seen as unthinkable, is now a possibility. In the meantime, Congressman Paul Ryan will soon be introducing a budget plan that would end the annual federal deficit within a decade without raising taxes.