T-minus four days and counting till Armageddon and the prospects for a deal seem almost as remote now as they were a week ago. Frankly, I’m feeling more and more pessimistic with each passing hour.
In the Senate, both the Susan Collins plan and the Harry Reid plan went down to defeat. The Collins plan called for a continuing resolution to fund the government for six months at sequester spending levels, an extension of the debt ceiling through next January and a repeal of the medical device tax in the Affordable Care Act. It also would allow for each agency affected by the sequester to set priorities with respect to those spending levels, thus avoiding many of the furloughs that have hurt the economy. The Reid plan would’ve extended the debt ceiling through the end of 2014 with no additional conditions. In other words, it was a clean bill.
Of course the problem really won’t be the Senate. I expect something to come out of the upper chamber by Wednesday. The real problem is the House. Now that it is crystal clear that the Tea Party’s attempt to derail Obamacare has failed, will John Boehner allow a bill on the floor that needs Democratic support? Until and unless that happens, we are spinning our wheels going nowhere fast.
My take on this is that the medical device tax is really no big deal. It is not integral to the ACA. Repealing it won’t affect the law’s implementation. The real sticking points for Democrats are spending, which for the moment is locked in at sequester levels, and the fact that by next January, we will have to revisit the whole debt ceiling issue again. Understandably, they want any deal to allow for the possibility of additional spending and a debt ceiling increase that takes them passed next year’s midterms, possibly even into January of 2015.
So now Harry Reid and Mitch McConnell are holding meetings together to decide the fate of the U.S. and global economies. Basically, it comes down to whether Felix Unger and Oscar Madison can agree on a deal that not only will pass the Senate with 60 votes, but will pass the House with 217.
Like I said, the Senate isn’t my concern. They’ll pass something they and Obama can live with. My concern is whether John Boehner will do the right thing and put the country ahead of his speakership. It’s clear he can’t do both.
If the last few weeks are any indication, I would start dumping any 1 month Treasury bills from your 401k portfolio as fast as possible.