The White House War Ground in the Battle of the Budgets
Both sides appear to have dug deeper into the debt-ceiling standoff as Republicans harden their line on budget cuts in exchange for a ceiling raise, and Biden refuses to surrender.
For today’s editorial, the battleground shifts from Ukraine to the White House where President Biden is meeting with Republican leadership to solve the US debt crisis by digging trenches deeper in each side’s positions as the standoff continues. That is, at least, how things appear to be starting off, given that over forty Republicans in the Senate, backed by Mitch McConnell, swore just ahead of the meeting they will not approve any debt ceiling raise that does not cut spending, and Biden, so far, sticks with his “clean deal” that gives him 100% of what he wants.
What neither side seems to be considering, as they keep talking about the deadline being early June is that they don’t have that long. They have forgotten the harsh lesson of 2011 where one credit-rating agency lowered the nation’s credit rating before the deadline hit because, while Republicans knew they would agree to a deal at the last minute, after negotiating for all they could get in a brinksmanship gambit, credit agencies did not have any way of being certain of that. The same thing could happen this time, if politicians push today past any signs of compromise. Yanet has already yelled that this will be catastrophic if a default actually happens, but serious economic repercussions could happen if the credit rating gets a downgrade ahead of default at a time when financial stresses are already building everywhere.
It is no wonder that Americans now express extremely low ratings for all of our nation’s economic leadership. Most deserving of the low award is Jerome Powell who has succeeded in a gallup poll released today at beating Yanet Yellen in a race for the bottom, coming in with the lowest rating for a Fed chair since polls began rating them.
Meanwhile banking stresses continue to dominate the investor psyche to where PacWest and Western Alliance have resumed their own race to the bottom. A new bull market was declared in the Nasdaq, which has now risen 20% this year from its last bottom, but that is likely to be the shortest-lived bull ever, a fitting bookend to 2020’s shortest bear market ever. The index has already slouched back below that 20% level today over the budget standoff. So, those who proclaimed it a new bull market, such as Seeking Alpha, may have just proclaimed the nation's first one-day bull market.
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