US Politics: Despite the all the Theatrics the GOP Sells out, Debt Ceiling Raised

Today's US debt ceiling drama reminds me of a favorite Filipino proverb by my best friend and foreign client “Pagkahaba-haba man daw ng prusisyon, sa simbahan din ang tuloy” (“No matter how long the procession, it still ends up in church”)

Despite all the rhetoric, drama and theatrics about supposed "principles", the end game, as expected, has been to accommodate the perpetual propagation of debt.

As I previously noted

This means that despite the hullabaloo in the US Congress, which really is just a vaudeville, as congress people will fear the wrath of (the voting public-added Benson), losing political power and privileges from entitlement dependent-parasitical voters, eventually the debt ceiling will be raised. (charts from the Heritage Foundation).

Like actions of central banks led by the US Federal Reserve, America’s welfare state will be pushed to the brink of a crisis or will fall into a crisis first, before real reforms will be made.

In the world of politics, cost-benefit tradeoffs has been reduced to short term expediencies.

Now the compromise fires up the debt starved stock markets again, from the Bloomberg

U.S. stocks rallied, sending the Standard & Poor’s 500 Index (SPX) toward a record, as the Senate crafted a deal to end the government shutdown and raise the debt ceiling before tomorrow’s deadline.

The reported Senate deal: (bold mine)

The bipartisan leaders of the Senate reached an agreement to end the fiscal impasse and to increase U.S. borrowing authority. The Senate and House plan to vote on it later today, and the White House press secretary said President Barack Obama supports the deal.

The framework negotiated by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7, setting up another round of confrontations.

The agreement concludes a four-week standoff that began with Republicans demanding defunding of Obama’s 2010 health-care law, and objecting to raising the debt limit and funding the government without policy concessions. House Speaker John Boehner said in a statement that Republicans won’t block the Senate compromise.

With no deal, the U.S. would exhaust its borrowing authority tomorrow and the government may start missing payments at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office. Fitch Ratings put the world’s biggest economy on watch for a possible credit downgrade yesterday, citing lawmakers’ inability to agree.

UPDATE the House of Representatives has reportedly acquiesced to the US Senate compromise.

And as I previously anticipated the GOP will sellout

And the fear of the wrath of the public which means losing political power have become a potent force in the shaping of the supposed deal…the American public has been putting the blame on the GOP (Republicans).

Here is House Speaker John Boehner statement on the Senate deal (hat tip Zero Hedge) [bold mine]

The House has fought with everything it has to convince the president of the United States to engage in bipartisan negotiations aimed at addressing our country's debt and providing fairness for the American people under ObamaCare.  That fight will continue.  But blocking the bipartisan agreement reached today by the members of the Senate will not be a tactic for us.  In addition to the risk of default, doing so would open the door for the Democratic majority in Washington to raise taxes again on the American people and undo the spending caps in the 2011 Budget Control Act without replacing them with better spending cuts.  With our nation's economy still struggling under years of the president's policies, raising taxes is not a viable option. Our drive to stop the train wreck that is the president's health care law will continue.  We will rely on aggressive oversight that highlights the law's massive flaws and smart, targeted strikes that split the legislative coalition the president has relied upon to force his health care law on the American people.

 

So the debt ceiling compromise will mark the 19th increase since March 1962. 

This also means that there will hardly be any reform until a crisis eventually hits.

At the end of the day, US politics end up where they started or from the default position of steadily raising debt. 

The Poker Bluffing circus never ends. The more things change...