BarroMetrics Views: Budget Deal
The capacity for self-delusion in Washington never ceases to amaze me.
The Budget Control Act 2011 was passed on the basis that the debt ceiling to be raised in return for a US$1.2 trillion deficit reduction over the next 10 years - guaranteed reduction.
The Bill that the House of Reps passed yesterday, not two years later, has reneged on the deal.
The deal makers today tell us that the increased spending of US$63B will be paid for newly created revenues and additional savings over the next 10 years. In short, spend today on the promise of future savings. If history is anything to go by, the future promises will be honoured by their breach.
The one thing the Bill may do is provide some relief to Wall Street. At least the possibility of another shutdown has been averted.
The next bear on the horizon is the debt ceiling due for consideration by Feb 7. With the stock market’s focus on tapering, the debt ceiling is not likely to be of concern now. And speaking of tapering….
The consensus is now that we’ll get some tapering next week. My view is that tapering is unlikely to begin before Jan 2014 and may not start until March 2014.