The Debt Ceiling Vote--From Now Until August

The House Republicans wanted to change the subject from Coupon Care and brought a clean bill on raising the debt ceiling to the floor today. Members were notified on Sunday that the bill had been prepared. When the members came to the House, they were asked to raise the debt ceiling because President Obama's budget created an additional deficit. The problem was that the debt ceiling entails all the debt to date--the bulk of which was incurred during the Bush-Cheney Administration.

Factually, the House bill was offered on a false pretense. The United States has to raise the debt ceiling so that the United States does not default. The House itself, which passed the Ryan budget, would have added $1.9 trillion anyway as would the first several budgets he proposed in his plan. In other words, the debt ceiling would have to be raised frequently under Ryan. Under Bush, it was raised seven times without a whimper.

Even the Chamber of Commerce said that they understood the comedy being played out on the House floor. Wall Street is acting that the debt ceiling will be raised--it's only a matter of time. But watch for the panic begin around July as the United States starts staring at a drop-dead date.

If the House is dysfuntional, so is the Senate, which has not passed a budget for over 760 days. The Senate was waiting for the Gang of Six to resolve their talks and then they broke up, saying they were waiting for the Biden Group to announce what budget cuts and taxes were agreed to. Senate Republicans have already said that tax increases are off the table for them. This means that the Democrats can not fall back to their position of adopting some of the Cat Food Commission's recommendations, which included tax increases.

So we are once again back at the White House--tomorrow the House Republicans get to complain to President Obama and the following day the House Democrats. This will begin the circus on the budget, which will last all summer.

The Washington Post has begun their softening up of public opinion by printing pieces that tax hikes will not solve the question of the debt. Indeed. But they start of the theoretical taxes on 501K plans, which have virtually no chance of passing and no one with any authority is arguing for. So we will be entertained by the usual barrage by the wealthy--make no mistake of who the media are--to try and kill any type of tax hikes.

In the meantime, the economy is swooning again with another collapse of the real estate market and consumer confidence. The austerity freaks like Niall Ferguson, British neo-con and fan of empires are trying to prove to Americans that European austerity measures are working--they aren't.

But all these Congressional games only show how dysfunctional both chambers have become. The good news is that the recovery seems self-sustaining, even though it is not robust. The reason it's not robust is because the housing market remains in a Depression and consumers are cutting back on purchases. This goes back to one of my first posts over two years ago when I warned that a consumer driven recovery was not to be and in fact we may have to reconsider the whole ideas of economic progress. I'm still betting on about 8% unemployment by the time of our elections in 2012. I also think that the American economy will not be able to better that unless it starts to change the basis of its national economy.

What is disturbing is that this town's politicians are living in a fantasyland if they believe the government doesn't have an additional, vital role to play in the economic recovery.

Finally, the debt ceiling vote is so America doesn't default. As the hacker of the Fox News sign around Times Square noted today, "The American economy is twice that of China's. The American economy is still as large as Europe's combined. We are not broke. It's just they are trying to destroy the Middle Class and Unions. " We are not broke. Bruce Barlett wrote a piece today that indicates that the percentage of GDP that goes to taxes is the lowest since 1950. And the Republican House would like to lower the taxes on the wealthy to the lowest since the 1920s.

Watch this space over the next few months. Not much will come out of the Congress this year. AAnd what does will not be healthy to humans.