|"I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up." Image: Alamy|
Delaying $110bn of spending cuts for two more months, whilst allowing tax increases for those families earning over $450,000 and allowing a 2% payroll tax cut to expire is a long way from the grand bargain investors were hoping for. Instead it realigns the spending cuts with the expected date at which the government will hit the debt ceiling – remember a fiscal cliff isn’t just for Christmas…
It is not hard to see opinion swinging in the Republicans’ favour now that the Democrats seem to have achieved so much of their policy agenda (raising revenue and cutting spending) and have raised taxes on 77% of households (according to Congressional Budget Office figures). Polling will reveal whether the public’s sympathy with House Republicans has grown and by implication whether they will indeed be in a stronger position to press their cause in a couple of months.
Another factor which is likely to be critical surrounds the election of the Speaker for the 113th Congress, convening on Thursday. Speaker Boehner was one of a minority of Republicans in the House who approved the bill. Eric Cantor, the Majority Leader voted against it. If this is an indication that Cantor wishes to run for Speaker himself, embroiling the Republicans in bitter infighting, it would help to cement their reputation as dysfunctional spoilers and hand the moral high ground back to the Democrats.
Either way, for the moment the can has been kicked, not very far, down the road again.
Head of Portfolio Strategy