Talk about procrastinating, Washington leadership left the debt deal to the last minute. Almost an hour ago the Senate voted in favor of passage of the bill that would raise the debt ceiling by a 74-26 majority. Obama is expected to pen his name on the bill and make it law shortly. Default is officially off the table, though a credit ratings downgrade from Standard and Poor’s (NYSE:MHP) is still possible. Moody’s (NYSE:MCO) and Fitch have come out and stated that they will no longer look to downgrade the US from AAA with the current debt deal, though S&P has yet to weigh in.
Hot Feature: The U.S. Debt Deal: Your Cheat Sheet to the Framework.
With the seven hundred pound Gorilla finally removed from the room, political leaders now have some crucial choices about where to put legislative focus in the coming months (after Congress returns from its two week recess). Here’s a look at some of the biggest issues on the table when politics get back in session.
With the stock market dipping below 12,000 Tuesday, supported by a string of nasty looking economic data, revitalizing the economy will be the number one issue on the table. Macroeconomic data has become so unsightly it is prompting analysts to fan fears of a double dip recession, or worse. Last week second quarter GDP came in at 1.3%, this week the ISM Manufacturing number of 50.9 was just above par, the consumer spending report was disappointing, unemployment is at 9.2% and could go higher on Friday, and the list goes on. Many believe that the jobs front will be the first line of attack in looking to jumpstart the economy. Speaking on the debt deal this afternoon, President Obama spoke of his desire to create a wave of infrastructure projects to help spark jobs growth, “We have workers that need jobs, and a country that needs rebuilding,” said the President. Addressing the press, Nancy Pelosi signaled that the job market is on top of the congressional agenda, “Its over [debt debate], and now its time to talk about jobs,” said the former speaker.
Three outstanding free trade agreements that need to be renewed, with the nations of South Korea, Panama, and Columbia are currently sitting stashed away in desks somewhere in Washington. These trade agreements, which have bipartisan support, would be likely to spur jobs growth and help to maintain a healthy international business relationship with trade partners. With the economy on the forefront of everyone’s agenda, these agreements should be one of the first things to get done when Congress returns from its recess. The South Korea deal is a particularly big ticket. The Seattle Times says of the deal, “KORUS [trade agreement] alone could increase exports of U.S. goods by at least $10 billion, and significantly increase the U.S. GDP…If approved, it would eliminate tariffs on more than 95 percent of industrial and consumer goods within five years; open Korea’s dynamic services market to U.S. companies; protect the intellectual property of American innovators.”
This one is something Washington may take a lot of flak for in the coming weeks if it does not resolve today. Currently the agency is partially shutdown, tax collections on air fares and airport infrastructure projects have been halted, and 4,000 employees have also been furloughed. The hot-button issue in this argument is a debate over labor, but hope that leadership has learned enough of a lesson on the need to compromise, via the debt ceiling dilemma, that it can put ideological differences aside and approve short term funding to the FAA. The shutdown has taken a steep toll on airline stocks in the past 10 days.
The National Debt
Thought we were over this one? Not exactly. While the debt deal offers a palatable short-term solution (to credit raters most importantly), it involves a lot of vague language, undefined spending cuts, and somehow put us nowhere near the path to a balanced budget. The national debt is still expected to increase by $8 trillion by 2020. A congressional “super-committee” will be appointed to take on this task when lawmakers return from their summer holiday.
Hot Feature: CHART OF THE DAY: Watch the US Debt Set a 60 Year Record.