by Bill McBride on 1/26/2014 07:15:00 PM
Sunday, January 26, 2014
Unfortunately "debt ceiling" sounds virtuous, but it isn't - it is actually a question of "paying the bills". And Congress will "pay the bills".
As I pointed last January, a poker analogy is that the GOP is bluffing into the best possible hand - and everyone knows it. They will have to fold, and everything they say is just political posturing.
Senator McConnell said today that he intends to fold and not go "all in" with his bluff:
"[W]e’re never going to default. [House Speaker John Boehner] and I have made that clear.”Note: There are certain politicians who think it is OK to not pay the bills as long as the U.S. makes interest and principal payments on the debt. That is crazy talk. There is a name for people who don't pay their bills: deadbeats. If politicians don't pay their personal bills, they are deadbeats. But if they stop the government from paying the bills, we are all deadbeats. And there will be serious economic consequences for not paying the bills on time. The consequences will build over time, but in a few months, not "paying the bills" will ripple through the entire economy.
Last year I pointed out that the election impact of a partial government shutdown would probably be minimal. BUT if Congress stopped paying the bills, people would remember. It was Republican Senator Mitch McConnell who said in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.
So it won't happen; Congress will pay the bills. No worries.