The game of "debt ceiling chicken" continues as Congress delayed a vote on Speaker Boehner’s latest plan until tomorrow. Apparently, the GOP doesn’t have the votes to pass it, which would lead to the adoption of Senate Leader Reid’s plan.
I suppose this is par for the course at this point. But let’s not make the mistake of thinking that Congress is trying to do what’s right. They are laying politics to push the agendas of their biggest campaign donors.
For instance, Rep. Eric Cantor has been perhaps the most vocal member about not raising taxes, or closing loopholes that would result in a net gain in tax revenues. But yesterday, the Washington Post reported that Cantor has taken in $2 million in campaign contributions from hedge funds and private equity firms who don’t want to see their taxes raised by the Obama administration.
One particular rule involves "carried interest", which allows hedge fund managers to have their compensation taxed as a long-term capital gain at 15% instead of as income, which would be taxed at 35%.
I want to be clear that I am not advocating raising taxes to close deficits. There is plenty of wasteful spending that should be reversed. And I’d start with the universal health care plan, which will cost businesses more.
My point in bringing up this article about Cantor is simply to shed some light on the real motivations behind Congressional talking points. And to emphasize that Congress is bought and paid for by lobbyists and campaign contributors.
It’s sad. And I’m frankly not sure what we can do about it.
Economists currently believe that America’s triple-A debt rating will be lowered, no matter what the outcome of the debt ceiling-budget negotiations.
That’s also sad.
Congress and the administration had plenty of warning that a downgrade was possible. And they have all been unable to make any substantive changes that would prevent a downgrade. I hope voters remember this when elections come around in 2012. They deserve to be voted out of office, the lot of them.
As for the debt downgrade, it’s not certain that this will be a total disaster. After all, U.S. debt would still be the best thing going. The EU is a mess and Japan doesn’t issue enough bonds to satisfy the market.
But for the sake of the stock market, the bond market and our collective self-esteem, let’s hope that negotiation doesn’t go down to the wire.
The stock market has been holding up pretty well despite the total dysfunction in Congress. But I can feel the frustration rising. I expect individual investors are completely absent from the current market, which leaves it in the hands of the institutional crowd.
That’s not necessarily a bad thing, as institutions aren’t likely to panic. And it’s a good thing earnings have been mostly solid. Bad earnings and Congressional stalemate would be a devastating combination.
Do we really need the pundits to come out and say the August 2 deadline for the debt ceiling is no big deal? The absolute last thing Congress needs is the idea that they have more time. Just get it done. Now.
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