The most honest man in Washington did some more truth-telling on CNBC last night. Speaking to Larry Kudlow, Mitch McConnell made perfectly clear that the hostage situation we just went through wasn’t a one-shot deal. It’s the new normal:
What we have done, Larry, also is set a new template. In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order.Previously, I’ve compared the debt ceiling to a bomb ticking away at the base of the economy. We don’t much notice it because it’s always been there and, despite a couple of close calls, it’s never gone off. But that doesn’t mean it won’t ever go off. Particularly if these sorts of showdowns become the norm.
And even if it doesn’t go off, Congress’s decision to make the risk of default more visible might well be enough to scare the markets. If you were an investor, would you want to put your money in a country that regularly held bitter partisan brawls over whether you would be paid back? Or would, say, German bonds begin looking like a comparatively better bet?
Hey, and the markets tanked today even with the debt ceiling deal signed...because Wall Street knows the Tea Party absolutely will pun another gun to our heads again soon. Hell, it may be in just a couple of months when the federal gas tax is set to expire on September 30. If it's not the gas tax, it'll be the budget battle heading into campaign season.
So yes, any wonder why the markets are going down in flames even with a deal? Wall Street knows more hostage-taking is just around the corner. The only way to stop it is to kick the hostage takers out of office.
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