You’ve heard what the early (and slim) analyst reaction has been, now for what the blogosphere has had to say about the fiscal deal achieved.
A good rundown comes courtesy of Pragmatic Capitalism’s Cullen Roche:
- A deal was actually finalized. That’s good news. It looked like we might actually go into January without a deal and that the odds of no deal at all were rising.
- No one really won here. Congress is totally dysfunctional.
- There’s still a lot unanswered.
US lawmakers moved closer to a deal on Monday to fund the government through next year, potentially avoiding a shutdown that would have further damaged Congress’ tattered reputation ahead of the 2012 election, Reuters reports. The group of Republican and Democratic lawmakers tentatively agreed on how to fund a wide range of government functions from homeland security to protecting the environment, congressional aides said. The details were not immediately available and lawmakers were expected to publish the massive spending bill on Tuesday, said Reuters. “There are still a couple of open items that need to be ironed out. These aren’t deal breakers or game changers but are still important issues,” said a Democratic spokesman for the appropriations committee in the House of Representatives. Read more
Markets reflected growing concern at the impasse over the US debt ceiling limits late Tuesday and early Wednesday. In Asia, the FT reports, shares continued to struggle, with the Nikkei falling 0.6 per cent, led by banks and exporters. In the US, the S&P 500 closed 0.4 per cent lower. Treasury yields rose, the dollar hit a four-month low against the yen and gold reached a new record in response to the stand-off, reports Reuters. Congress has begun gearing up for its first critical vote on the US debt limit, but the FT says Republican leaders are grappling with a possible conservative mutiny which could threaten their hopes of avoiding a US default through a two-step increase in borrowing authority. The plan to hold a vote on Wednesday also took a hit from Congressional Budget Office analysis which showed it would save less money than anticipated. Most Democrats and the White House oppose the plan. Read more
President Barack Obama and John Boehner, the top Republican in the House of Representatives, are engaged in a final high-stakes push to secure an ambitious budget deal, less than two weeks before the US runs out of cash to pay its bills, the FT reports. Both the White House and Mr Boehner’s office denied they were close to an agreement, amid rising anxiety in both the Republican and Democratic camps that elements of the deal could provoke a backlash from their respective bases. The agreement under discussion involves some $3,000bn in spending cuts over 10 years, with a commitment to tax reform next year that could bring in additional revenue. But officials familiar with the talks said both sides remained apart over the issue that has long divided them – the Democrats’ insistence that any deal include extra revenues. Republicans have so far opposed any efforts to generate additional revenue by raising taxes or limiting tax deductions for wealthy Americans and some businesses. Read more
There was new hope on Capitol Hill that a sweeping deal to increase US borrowing authority and slash the nation’s deficits by $3,700bn over ten years was within reach, after Barack Obama backed an agreement among a group of Democratic and Republican senators, the FT reports. Bond investors welcomed the development, with 30-year government bonds rising on hopes of a credible deal to alter the trajectory of America’s long-term fiscal issues. The yield on the “long bond”, which moves in the opposite direction from its price, fell 10 basis points on the day in New York to 4.18 per cent. “I think it is a very significant step,” the US president said of the so-called “Gang of Six” deal. “I think we’re on the same playing field and my hope is that we can start gathering everybody over the next couple of days to choose a clear direction and get this issue resolved.” Mr Obama warned, however, that America was still in the “11th hour” ahead of an August 2 deadline to avoid a possibly calamitous debt default. He put the onus on Congressional leaders to stop posturing and “start talking turkey”. If they failed to produce a concrete plan, he said markets in the US, the international community and the American people would start “reacting adversely fairly quickly”. Read more
You’re looking at an excerpt from the 2008 Housing and Economic Recovery Act. That’s the thing which created the Federal Housing Finance Agency (FHFA), which is currently charged with regulating the US’s massive Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Read more
President Barack Obama late on Wednesday walked out of budget talks with Republicans, raising concerns that the White House and Congress will fail to strike a deal on fiscal policy and increase the US borrowing limit, the FT reports. The abrupt end to the rancorous talks came just hours after Moody’s, the credit rating agency, warned that continued political deadlock over raising the debt ceiling might lead it to downgrade the US from its triple A credit rating. A Wall Street Journal op-ed, says that wise or foolish, “this budgetary game of chicken is contrary to law.” Meanwhile, Fed chairman Ben Bernanke said on Wednesday that failing to raise the debt ceiling will have “a very adverse effect very quickly on the recovery.” Read more
Barack Obama repeatedly pressed Republican leaders to reconsider their decision to abandon a $4000bn fiscal reform package at a high-stakes White House summit on Sunday night, the FT says. According to a Democratic official, the US president’s pleas were rejected by Republican leaders, who over the weekend said negotiations would have to focus on a less ambitious package worth about $2,000bn that would allow for an increase in America’s borrowing limit, but delay a solution to the country’s long-term fiscal woes until after the 2012 presidential election. Talks on the debt ceiling will resume on Monday. In the meantime, New York Times columnist Ross Douthat explains the method behind the Republican “madness.” Both Treasury secretary Tim Geithner and new IMF chief Christine LaGardewarned over the weekend of the ramifications of a US default, reports Reuters. Read more
Nobel Prize winner Peter Diamond said on Sunday he planned to withdraw as a nominee for Federal Reserve governor, after his nomination was repeatedly opposed by Republicans, Reuters reports. Diamond, in a New York Times op-ed, says Republican critcism is “a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.” Diamond’s withdrawal, a recognition that Republican objections could not be overcome despite three committee votes approving him, leaves the White House with two vacancies to fill on the seven-seat Fed board as the central bank debates what to do about a weak economic recovery after its $600bn bond buying programme ends this month. Read more
Republicans in the House of Representatives have splintered over plans to reform Medicare, the healthcare programme for the elderly, entering new budget talks in apparent disarray, the FT reports. A month ago, House Republicans proposed dramatic changes to Medicare as part of their 2012 budget, a politically risky blueprint designed to highlight the party’s determination to curb the mounting US debt load. But this week, just as the White House and lawmakers began fresh negotiations on a deal to raise the US debt limit – Republicans sent conflicting messages on whether they would continue to push for Medicare reform. The LA Times says Republicans are acknowledging that their plan to privatise Medicare isn’t moving forward any time soon as talks over how to shrink the federal deficit continue. Read more
The White House looks set to take a more aggressive negotiating stance against Republicans in the next fight over US fiscal policy: the vote in Congress to increase the nation’s $14,300bn debt limit, the FT says. Three days after Mr Obama helped settle a budget dispute that avoided a partial government shutdown, the White House said a decision by Republicans to “play chicken” with a vote over the debt limit would have “Armageddon”-like consequences for the US economy. Bloomberg reports that the US on Tuesday unveiled legislation identifying which programs would be cut in order to produce the $38bn in savings promised by the president and congressional leaders of both parties. The Environmental Protection Agency, high-speed rail, agriculture and law enforcement are among the programmes that would get reduced funding as part of the budget deal reached last week to avert a government shutdown. Read more
Republicans in the House of Representatives are gearing up for a federal shutdown, amid stalled talks on a deal to fund the government for the rest of the fiscal year, the FT says. John Boehner, House speaker, on Monday night said lawmakers would be given guidance on how the lower chamber of Congress would function in the event of a shutdown, which could come as early as Friday night if no deal is reached with Senate Democrats and the White House. Amid the standoff, President Barack Obama on Monday launched his re-election campaign for the November 2012 presidential poll, seeking to gain a fundraising jump on Republicans in what is expected to be by far the most expensive race in US history. The Caucus adds that the US government is expected to hit its $14,290bn debt ceiling “no later than May 16.” Read more
Republicans in the House of Representatives vowed to present a long-term budget proposal that would cut more than $4,000bn from US deficits over the next decade, exceeding the target set by a bipartisan fiscal commission appointed by Barack Obama, the FT says. With details expected to be released on Tuesday, Paul Ryan, chairman of the House budget committee, said his party’s plan would put the brakes on the growth of Medicare and Medicaid, the two largest government healthcare programmes, while proposing deep cuts and caps to spending. The WSJ says the plan would essentially end Medicare. Read more
The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned, the FT says. The note from Alec Phillips, a forecaster based in Washington, was seized in the ongoing US budget fight by Democrats as validating their argument that the legislation approved by the Republican-led House of Representatives last Saturday would do significant damage to the US recovery. ABC News has a copy of the report. Read more
Republican leaders in the House of Representatives are in the early stages of crafting a new short-term bill to fund the US government, congressional aides said, in a sign that they are open to a compromise that would avoid a shutdown of the federal government, according to the FT. On Saturday the House passed an aggressive budget measure for the rest of the fiscal year that includes $61bn in spending cuts, which has been criticised by Democrats and the White House as too draconian. But only a few days later it has emerged that Republican party leaders are preparing a bill that would fund the government for a much shorter period, with fewer spending cuts. Read more
Senators from both leading parties expressed hope on Sunday that a budget deal could be reached by early March, but any details were lacking and fears remained that the US could face a 1990s-style shutdown of the federal government, the FT reports. On Saturday, the Republican-controlled House of Representatives voted to approve $61bn in spending cuts from a bill to fund the government for the rest of the fiscal year, which ends on September 30. But Democrats and Barack Obama’s administration are opposing the measures, on the grounds that such fiscal retrenchment could damage the US recovery. With the government funded only through March 4, the government could run out of money if lawmakers fail to act, but both sides have been urging compromise, Reuters adds. Read more
Like its predecessor, the 112th Congress has proven it’s possible to shoot oneself in the foot while putting it in one’s mouth.
House Republicans said in their Pledge to America that: Read more
Hispanic voters’ apparent disenchantment with Republicans is likely to become a growing problem for the party after US census results showed that population gains in mostly Republican “Sun Belt” states were driven by Latino voters, the FT reports. Texas, a solid “Red” state that supported John McCain in the 2008 presidential election, is gaining four new seats in the House of Representatives. according to census results. But two of them could well be won by Democrats, analysts say, marking the beginning of a gradual shift that could favour Democrats in states such as Nevada, Arizona and Colorado. Read more
President Barack Obama sealed a big foreign policy victory after months of effort when the US Senate ratified an arms control agreement with Russia, the FT reports. Wednesday’s 71-26 vote to approve the Start treaty, which Mr Obama personally negotiated with Dmitry Medvedev, his Russian counterpart, marks the latest in a series of successes for the US president following large Republican gains in Congressional elections last month. “This is the most significant arms control agreement in nearly two decades,” Mr Obama declared after the ratification, which was backed by 13 Republicans. Mr Medvedev said Russia would proceed to approve the treaty “in parallel” with the Senate ratification. Read more
President Barack Obama has won the support of enough Republicans to ensure the ratification of the Start treaty – his most prominent foreign policy deal, the FT reports. Just a few weeks ago, prospects for the arms control agreement with Russia were uncertain at best. But a concerted push by the White House has left Mr Obama poised to win ratification and cap a series of legislative successes in the current “lame duck” session of Congress. The Senate voted by 67 to 28 on Tuesday to proceed to a final decision on the treaty as early as today. The votes in favour, which included 11 Republicans, would be enough to reach the two-thirds majority of the chamber needed for ratification. The FT also reports that the US has unveiled new sanctions against Iran, in a move that highlights Washington’s drive to keep pressure on the Islamic Republic ahead of a new round of negotiations with Tehran next month. Read more
The US deficit commission’s contentious recommendations to slash $3,900bn from budget deficits by 2020 received a boost when two senators said they would introduce legislation early next year mirroring the panel’s proposals, the FT reports. The move by Saxby Chambliss, a Georgia Republican, and Mark Warner, a Virginia Democrat, is an attempt to rally Congress towards a difficult bipartisan consensus on steps to tackle the long-term debt problem in the US. It could add pressure on the Obama administration to come up with its own deficit reduction plan ahead of the state of the union address and the 2012 budget proposal, expected in February. Read more
The FT reports that the new Start arms control treaty with Russia, President Barack Obama’s signature foreign policy goal, is on the verge of winning US Senate ratification, say supporters and detractors. On a day in which the treaty’s prospects of approval appeared to grow steadily, senator John McCain submitted an amendment that looked likely to increase support for the measure among Republican ranks. Earlier, it had appeared more probable the administration would win just enough votes for ratification. With one absence due to illness, the Democrats and associated independents have 57 votes and 66 are needed for ratification. Read more
As he signed the sweeping $858bn tax bill into law, Barack Obama joked that the bipartisan consensus that had made the deal possible could be difficult to replicate in the future, the FT reports. The question now is whether the tax deal represents a model for the next two years that would see Mr Obama hammering out more compromises with the Republican leadership and bolstering his image with the politically moderate American voters he needs to win re-election in 2012. One senior Democratic aide in the Senate says that the White House has so far been coy. “The White House is not signalling that it is a new way of doing business, but I anticipate there will be a lot of issues that will present opportunities for a natural linkage with Republicans.” Read more
A deal between President Obama and Republicans to extend Bush-era tax cuts was approved by the US Congress on Thursday, Reuters reports. The House of Representatives, on a 277-148 vote, passed the $858 bn package of renewed tax cuts and more unemployment benefits, to the dismay of many Democrats. The deal, which was approved by the Senate on Wednesday, aims to create jobs but is also expected to add to the national debt, the news agency reports. “This legislation is good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their workforce,” said Timothy Geithner, US treasury secretary. Many Democrats are concerned that tax breaks to the wealthy would not necessarily mean money would be re-invested in the faltering economy. Democrats in the House of Representatives had delayed a vote to seal congressional approval of the $858bn tax package agreed by the White House and Republican leaders, as dissatisfied members of Barack Obama’s own party mounted a last-ditch effort to prevent the deal from being rapidly enacted, the FT reported. Read more
The US Senate has given its final stamp of approval to the deal to extend Bush-era tax cuts in a 81-to-19 vote that will further bolster the agreement’s chances of being enacted by the end of the week, the FT reports. After shooting down three amendments to the proposed legislation, senators from both parties on Wednesday overwhelmingly passed the agreement negotiated by the White House and Republican leaders which would keep current income tax rates in place for all Americans, including the wealthiest, cut the payroll tax for one year, and extend unemployment benefits. The FT also examines the rift the deal is causing between Republicans, while the New York Times has an interactive graphic of the Senate vote. Read more
The bipartisan commission established to probe the causes of the 2008 financial crisis has split along party lines with its Republican members publishing a report placing the government rather than Wall Street at the heart of the crisis, the FT reports. The Financial Crisis Inquiry Commission was set up by the US Congress as a latter-day version of the Pecora commission that examined the causes of the Great Depression. But its descent into bipartisan rancour means those examining the causes of the crisis in the future will confront duelling reports rather than an authoritative single account of what led to it. The official report, which is now set to be authored only by Democratic commissioners, is due to be published early next year. The FCIC announced last month that it would miss its Wednesday deadline. Read more
Wary Democratic leaders in the House of Representatives were inching closer to accepting legislation to extend Bush-era tax cuts, even in the absence of significant changes, the FT reports. After an overwhelming show of support for the deal in the Senate, with lawmakers from both parties voting by a wide margin to advance the measures towards final passage in the upper chamber late on Tuesday, the focus of all the attention on Capitol Hill had shifted to the House. Congress’s lower chamber has been the principal hotbed of discontent with the deal negotiated between the White House and Republicans, which also extends unemployment benefits and cuts the payroll tax in 2011. The debate in the House could begin as early as Wednesday, and Nancy Pelosi, House speaker, Steny Hoyer, majority leader, and Chris Van Hollen, the main negotiator on the tax package, were meeting on Tuesday evening with party members to discuss their options. Read more
Democratic leaders in the Senate forged ahead with plans to vote on a deal championed by the White House to extend Bush-era tax cuts and unemployment insurance, after changing the proposed legislation to include a series of tax credits to promote production of renewable energy the FT reports. “This bill is not perfect, but it provides the economic boost middle class families . . . need,” said Harry Reid, majority leader, as he unveiled the proposal, which will be debated in the coming days with a vote on Monday. Apart from the addition of the energy provisions, the Senate version of the bill largely tracks the terms agreed by Barack Obama, US president, and Republican leaders early this week, and appears likely to be approved by the upper chamber. The FT also reports that the White House was facing pressure to present a detailed plan to address the dismal fiscal outlook in the US, following a meeting with members of a bipartisan panel that last week suggested $3,900bn in budget cuts by 2020. Read more
Democrats in the House of Representatives have rejected White House efforts to build support for a deal extending Bush-era tax cuts, saying they will not put the measure to a vote unless it is modified, the FT reports. The decision by House Democrats, angered that the Obama administration’s deal with Republicans includes extension of tax cuts for the wealthy and generous provisions on the taxation of estates, goes against momentum building among some top Democrats to support the deal. The Senate was set to proceed on Thursday with a debate on the measures, and then its first vote – possibly on Saturday – after key Democrats including Kent Conrad, chairman of the budget committee, indicated support for the deal. The NYT says that if the tax deal is enacted, it could add to pressure for simplifying the income tax system, and that President Barack Obama is already considering whether to push in early 2011 for an overhaul of the tax code to lower rates and raise revenues. Read more
The White House warned that failure to pass Barack Obama’s tax compromise with Republicans would have dire consequences for the US economy as Democrats in the Senate prepared to vote on the measure as early as today, the FT reports. Harry Reid, the Democratic leader in the Senate, said he hoped to make some changes to the deal, which would extend all Bush-era tax cuts for two years, prolong unemployment benefits for 13 months and cut employee payroll taxes by 2 percentage points. The FT adds that US chief executives set their sights on rolling back financial and healthcare reforms and forestalling environmental regulations on Wednesday after celebrating the White House-led deal on tax cuts. The Business Roundtable, a group of the heads of the biggest US companies that has criticised Barack Obama in the past, praised the president’s “willingness to learn”. Meanwhile Tom Coburn, the Oklahoma senator who last week voted in favour of a sweeping plan to cut US budget deficits by $3,900bn during the next decade, said in an interview with the Financial Times the tax cuts deal did not “address our real problems and the real problem is we are in a hole financially”. Rising interest rates have slowed the pace of mortgage refinancing activity in the US, the FT also reports, potentially siphoning billions of dollars from the economy at a time when the housing market remains fragile. Reuters reports that rising mortgage rates will hurt homebuyers and those refinancing their mortgages. Read more