Will the Clock Beat the Deal?

For those of you who have read some of my recent blog postings, you know that I feel that President Obama has taken a horrendous situation, not of his making—the shutdown of the U.S. government—and turned it to his political advantage. Now, with less than two days away from the first possible default on the American debt, I am not so sure that my calculation was correct. Could it be that I misread the situation, and that our 44th president is more patriot than politico?

Maybe.

Let’s look at where we are at this moment. I am writing this posting in the early morning hours of Tuesday, the 15th, with about 40 hours to go before we reach the U.S. Debt Ceiling. Yesterday came all sorts of great-news stories about how Senate Leader Harry Reid and Minority Leader Mitch McConnell have staved off Armageddon because they had made “substantive progress” and are “close to a deal.”

On the floor of the Senate, Reid could not praise his “friend” enough (even though the two despise each other), nor could he contain his enthusiasm (although with his awful monotone it is hard to tell): “I am optimistic that we will reach an agreement, that is reasonable in nature, this week.”

This week? Mr. Reid, may I remind you that we do not have “this week” to reach a deal. In fact, with only 40 hours to go and still no definitive deal in the Senate (I will get to the House in a moment), it is probably too late to hope for a deal by Wednesday at midnight, given all that has to happen to end this needless Debt Ceiling standoff.

What must happen between now to get to the finish line in time? Consider the following:

1. First Reid and McConnell must reach a definitive deal in writing, and it must be written up as legislation and then voted on by the Senate. That will take until Wednesday (the 16th) at the soonest—given the rules of the Senate—just one day before the deadline. And even that could be delayed if Cruz or a crazy-Cruz-crony objects to the amendment.

2. Assuming that the bill passes the Senate, it then must go to the House and Leader John Boehner, whom, for reasons to difficult to fathom here, is still very fond of his job. And it is the House where things are likely to go down in flames.

Let’s take a moment here and detail all the things that could go awry between now and Thursday at 12:01 am—the moment the U.S. defaults on its debt for the first time since 1789:

1. Reid and McConnell never reach a deal that is approved by the White House. That is unlikely. However, it is worth noting that all four (4) Congressional leaders were slated to meet with Obama and Biden yesterday at 3 pm EST at the White House. That meeting was “postponed” and not rescheduled. All of the cable news channels said that this was “a good thing,” for it proved that the Reid and McConnell were so close to a deal that they did not require the negotiating needs of the President or deal-maker-in-chief VP Joe Biden.

But is that the real reason the meeting never happened?

Or, could it be something more sinister, such as the fact that the two Senate leaders had included in their deal two Obamacare issues, albeit quite minor ones, which the President objected to? Once again, we don’t know, but according to news reports, the President is ready to sign off on the Senate “kick-the-cans-down-the-road” plan now. But there is still no deal, and as John Boehner likes to say, “there is no deal until everything is a deal.”

We do know that Obama has never once loosened his stance on Obamacare, demanding a clean amendment that included no demands whatsoever on his signature piece of legislation. As late as yesterday afternoon, Obama had said that he still refuses to pay a ransom for Congress to simply do their jobs. GOP senators are still asking for concessions before they would vote for the amendment. Could those two minor Obama clauses be the reason that there is still no deal? Possibly, but still unlikely.

What else could go wrong? There is always Mr. Cruz—the Senator who almost single-handedly shut down the government and had the absolute unprecedented chutzpah to complain about the shutdown with gal pal Sarah Palin on the National Mall this weekend, despite that it was Cruz himself who engineered the shutdown (a plan he had in the works since the first day he landed in D.C.). Could he be planning some shenanigans that could put a monkey wrench in the works? Yes, a filibuster, but this time, not a “green eggs and ham” filibuster, but a genuine, stop-the-legislation one. That could slow things down quite a bit and knowing how angry he is that his Senate colleagues appear to be caving, I would not be at all surprised to see Cruz pull something that would slow things down enough to push the process past the deadline.

Then there is the hapless John Boehner and his merry-men. And that is where the greatest chance of a disaster–or even a miscalculation—can happen. Let’s look at how that can play out:

Boehner can simply refuse to bring the bill up for a vote, knowing that most GOP members in his caucus will vote against it. But that is not likely, even though House Republicans will hate the Senate bill. But there is way too much pressure on him to simply punt. He has to bring a bill up for a vote, but not the bill up for a vote (or the House can simply bring their own bill up for a vote—and send that one over to the Senate before the Senate even votes in theirs).

Let me explain what else could happen. No, let someone else explain. New York House Republican Michael Grimm. He gave us a real glimpse into the Republican psyche last night. It was then that the congressman told CNN’s Anderson Cooper that while he is likely to go along with the Senate deal, that “we are likely to change something nominal and ping it back [to the Senate] because procedurally it is better to come from the House.” And there is where the wheels could come off the U.S. economy.

How?

What if the House attaches something regarding Obamacare—let’s say something relatively minor, which could be anything. Obama and/or the Senate will have no choice but to issue a veto threat lest they give in to the very “terrorists” who started this whole government shutdown/Debt Ceiling Debacle in the first place. And if that happens, which is likely, there is no way a deal gets done before Thursday, and we breach the deadline.

And that is precisely what I predict will happen. Although at this moment in time the markets do not believe it, I see a better than 50/50 chance of that that nightmare becoming a reality. Instead of putting their party—or for more importantly the American people—ahead of their own selfish ambitions, Cruz and other Tea-baggers are likely to push us into default. And just the fact that the possibility exists should be sending shivers throughout the financial markets throughout the world. And do not think that Wall Street is not prepared for this outcome. Firms like JP Morgan and Goldman Sachs have been war-rooming this possibility for weeks.

So time will tell if the clock will win—or the world will win.

Things are moving quickly, so please stay tuned for frequent updates!
—Jeffrey A. Krames, 7:00 am, October 15, 2013

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