How is This A Good Deal?

Money Printing Press

There was a debt ceiling deal signed into law today. The text of the bill was released to the press only minutes before the vote went down. I wonder why that was? So, this new debt ceiling increase does a bit more than you might expect.

“This amendment is a significant development for future debt ceiling negotiations as it will forever remove the uncertainties associated with prolonged and disruptive negotiations on this issue,” Millan L. Mulraine of TD Securities said in a note to clients. “By design, the amendment makes future debt limit increases automatic, removing the specter that this issue could again be used by a minority as a bargaining chip in the future.”

Well, actually no, both Republican and Democratic Senate officials said.

This procedural maneuver in question is called the “McConnell rule,” as it is the brainchild of Senator Mitch McConnell of Kentucky, the Republican leader.

Indeed, if Congress put the McConnell rule into effect permanently, it would make it impossible for a small group of lawmakers to push the country into default. But the law puts it into effect only temporarily. Starting now, the Treasury Department is allowed to issue as much debt as needed through Feb. 7. There is no specific number for debt limit.

At that point, however, everything reverts to the previous rule, which requires Congress to raise the debt limit in some way for Treasury to increase the total amount of official borrowing. Mr. Obama would lose the ability to issue debt as needed. Treasury can still employ “extraordinary measures” to keep paying its bills. Eventually, unless Congress acts, another cash squeeze would set in.

The deal explicitly includes an option for Congress to object to the president’s increasing the country’s debt. And Mr. McConnell intends to introduce such a motion, an aide said. But because it would need to pass through Congress and then override a presidential veto, it is just a symbolic gesture. (Democrats, who control the Senate, would never go along with it.)

It's easy to see where this goes. The Treasury Department can just add more debt. The debt could be increased by enough to negate the issue for years to come. While that's not unheard of; congress will not be involved in determining what that amount should be.

Basically the Republicans did much worse than just give away their bargaining ability --they gave debt control entirely to their political opponents. This was done in a not so up front way. I bet that will do the Republicans a lot of good come primary season.

I predict that the debt will be increased by a modest amount right now. Then in when February comes around the Treasury Department will increase the amount of debt drastically to avoid another debate.

This is why I agree with the idea that there is a political class --ruling, not governing. This is why the Republicans attacked Ted Cruz, he is not ruling, he's representing. There must be a movement to vote out the "ruling" Republicans from office in the primary season.

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