The House failed to vote today on the Boehner debt ceiling bill. There are, apparently, too many Republicans holding out as well as all the Democrats. As a result, credit default swaps on US treasuries are at the highest they’ve been since the 2008 financial crisis.
I tweeted this some time ago and the more I watch this unfold, the more I’m convinced it’s going to happen. Three years ago, Congress failed to pass TARP. When they did, the financial markets freaked and nearly melted down. Congress then rapidly passed a TARP bill that was worse than the one they defeated.
This is going to go down the same way. Tomorrow or Monday, the markets are going to freak. They’ve been holding back, hoping for a deal. But until the freak, Congress is going to continue to fuck around, living in their little sound bite fantasy world. When they do finally get the message, we’ll get a rapid deal that will be far worse than what we could have gotten weeks ago. Such is the price of ideological purity.
The thing is, even passing a deal many not spare the rest of us from the pain. Interest rates will still go up — effectively erasing any budget cuts. Treasuries may even be downgraded. At this point, it feels like we’re just going to stave off disaster. We could have had much more.