StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Cantor Bolting Budget Talks Puts Bullseye On Boehner's Forehead

23 Jun 2011
Posted by Stan Collender

In case you haven't heard, House Majority Leader Eric Cantor this morning withdrew from the budget negotiations being led by Vice President Joe Biden.

If you were surprised by this, you haven't been reading CG&G.  As I posted yesterday, all of the happy talk that has been coming from the budget talks should have been taken with a healthy dose of skepticism instead of the optimism that has been reported.

But it's also not surprising because Cantor doesn't represent a wing of the House Republicans that was ever going to vote for a deal on the debt ceiling.  That's why, while done in an overly dramatic way, his departure from the talks isn't that meaningful.  The question is whether Boehner has now been further forced into a corner and, as he did immediately after the Cantor story broke, has to appear to be holier than thou with the tea party.

The real balance of power on this vote is with the non tea party wing of the GOP and that's a group with which Boehner has better credibility than Cantor.  From my perspective, the only way Boehner can get them to go along is to wait until the last minute so it looks like he has driven the best possible deal and then hope that market jitters allow him and his colleagues to say that he has no choice.  He's only going to get about 100 GOP votes to pass a bill.  That means that he can't go too far right and expect the 118 Dem votes he'll also need.

 

 

 

 

 

Chicken Cantor & Chicken Boehner

Sure, it's only the creditworthiness of the United States. Why not play chicken?

Incidentally, given that there are enough Democrats + not-overly-insane Republicans to prevent default by passing the bill, why go through the charade of negotiations? We're not going to have a bill that ends Medicare or whatever it is the Tea People think they're supposed to say they want today. Why bother? Just get the bill that can pass and prevents things from blowing up.


The 10 year treasury yield is

The 10 year treasury yield is down to 2.9%, so that market seems optimistic.

Tell me again why someone can claim we have a debt problem, refuse to even talk about raising taxes and not be laughed at.


Forget the 10 Year

The yield on the 1-Month Bill has gone marginally negative (-0.05%), something we haven't seen since the Lehman days. What that is saying is that some investors are so scared right now that THEY WILL PAY the US Govt to hold their money for a month. Ironic if you ask me since a month from now will put you smack in the middle of the debt ceiling negotiations. My takeaway: bond market doesn't think not getting paid by the US Govt is a real risk and is really really scared of bigger issues: double dip, Europe, unemployment, deflation.


Silliness

Cantor's statement afterwards was that both sides had made huge strides on spending reform and were near a consensus, but then the Democrats asked that there be SOME tax increases as part of the overall plan and that caused Cantor to bolt from the negotiation. This whole notion that there can never, under any circumstances, ever be a tax increase of any sort is absurd.


Too much drama here

Too much drama here.
Even if the worst happens and the deal is not made this would simply mean that we have a balanced budget amendment in place - no more borrowing.
Something that we should have enabled long ago.
In the more perfect world where politicians borrow in hard times and run a surplus in good times it would not be necessary. Alas, we have politicians that we have. Some may even attribute this to human nature.

Thus, we need balanced budget amendment. Lack of budget deal is just that - by another name.

Some poster here imply that this means default on debt. Not at all. Servicing the existing debt can easily be done with a small percentage of current federal revenue.

Some other expenditures would have to be cut, that's true. But so be it - apparently there is no other way to force the politicos to face the music.


"Let's balance the budget like you balance your household

budget. Ok, let's!

I have a mortgage (doesn't almost everybody?) and two cars I'm making payments on. At some point, I'll have to take out loans to pay for my kids' college tuitions.

These loans allow me to pay my bills and living expenses and stay within my income level. I'm trying to increase my income, because...well, I'd like to live better.

Isn't that what the federal government does now? And haven't we thrown our state governments into complete chaos under this balanced budget canard?




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