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Tuesday, May 03, 2011

The Debt Ceiling Farce

by Calculated Risk on 5/03/2011 08:50:00 AM

First some details from Bloomberg: Geithner Extends Debt-Ceiling Deadline to August

The U.S. can borrow until Aug. 2 after reaching the $14.29 trillion limit because of “stronger-than-expected tax receipts” and by taking “extraordinary measures” such as suspending the sale of bonds to finance state and local infrastructure projects, Geithner said in a letter to congressional leaders yesterday. He previously said the deadline would be July 8. Without such measures, the legal limit will be reached May 16 ...
Ezra Klein writes: The debt-ceiling drama begins
[T]here’s always the chance that the spectacle of Congress bickering towards a default will cause the market to freak out even though we technically have a couple of weeks left. This is the Clint Eastwood theory of money management, in which Congress needs to ask itself, day after day, week after week, whether it feels lucky. And it’s totally reckless and unnecessary.
There is very little drama; the debt ceiling will be raised. I suppose this is entertaining for anyone who enjoys watching politicians preen, posture and generally make fools of themselves.

Udpate: from Stan Collender Debt Ceiling Questions in the House
[G]iven recent polls that show seven of 10 Americans do not want the debt ceiling raised, will most or all House Members have to vote against the bill at least once so they can show their constituents that they were against it before they were for it? Will Wall Street — especially foreign investors — get spooked if a debt ceiling increase bill goes down in the House, or will it recognize that an initial “no” vote is needed to make it easier for a bill to be enacted?
Expect a "no" vote before a "yes" vote. Oh, the drama :-)