House Republicans have a few minor, hardly-worth-mentioning demands in return for graciously agreeing to waive or raise the US debt ceiling: one-year Obamacare delay, Paul Ryan-esque tax reform, fast-track tax reform authority, energy reform (Keystone Pipeline, coal ash regulations, offshore drilling, energy production on federal lands, EPA carbon regulations), regulatory reform (REINS Act, regulatory process reform, consent decree reform, blocking Net Neutrality), federal employee retirement reform, ending the Dodd Frank bailout fund, transitioning CFPB funding to appropriations, child tax credit reform to prevent fraud, repealing the Social Services Block grant, means testing Medicare, repealing a Medicaid provider tax gimmick, tort reform, altering Disproportion Share hospitals, repealing the Public Health trust fund,
Is that all? Seems incomplete. How about a few more: 1) Herman Cain’s 9-9-9 tax plan, 2) personal retirement accounts, 3) renaming Dulles airport after Calvin Coolidge, 4) Brilliant Pebbles missile defense (or x-ray pulse laser, whatevs), 5) nominating Ron Paul for Fed chair, 6) national apology from Jimmy Carter, 7) details on how Hillary really made $100,000 from cattle trading, 8) Harry Reid to return Romney’s tax returns, 9) Obama to visit Bakken oil fields in North Dakota, and 10) new episodes of 24. (Wait, that last one is already happening. Change that to new episodes of Firefly.)
OK, the point here is that Obamacrats and House Republicans are far apart. “Make no mistake — this will become a genuine crisis, far more ominous than the threat of a government shut-down,” says Greg Valliere of Potomac Research in his morning note. And the latest from Chris Krueger of Guggenheim Washington Research Group, who sees a 40% chance of technical default:
This list only underscores how difficult the debt ceiling raise will be to engineer. What is Obama offering? Nothing. Full stop. Ultimately, something symbolic will have to be given from the White House for a raise (which will happen) but with 21 days to go we base that on nothing more than blind faith because there is no evidence to suggest that this group of politicians can get out of the box they have created.
Someone has to blink. Magic bullet solutions from Obama look dubious. Either a ) invoking the “constitutional option” and unilaterally raising the debt ceiling, or b) instructing the US Treasury to mint a handful of trillion dollar platinum coins to be deposited at the Fed would, says Krueger, “likely trigger a wave of lawsuits similar to the Constitutional Option and create two tranches of treasuries. We do not see the platinum coin option as a viable solution.”
The US won’t stiff creditors or even delay bond payments to create a technical default. But it will have to cut spending by 40% and not cut checks to people who are owed check. So the US government will not be meetings its financial obligations as the economy begins to tank and financial markets react. October 17, the debt ceiling “X date” according to Treasury Secretary Jack Lew, will be here before Washington knows it.