U.S. Debt Crisis Resolved?

U.S. President Barack Obama is endorsing a deficit reduction plan crafted by a bipartisan group, equally weighted between six Republicans and Democrats.  The group, super creatively known as “The Gang of Six,” has announced a $3.7 trillion plan whose machinations would unfold over the course of a decade.

Most politicos feel that the plan has a zero chance of passing intact.  This is because the plan contains language that has changes intended for the tax code.  And of course, the Tea Party has become ironically, the unintentional defender of the Internal Revenue Service (that’s the U.S. tax collector for my foreign readers).

Even if the plan were the most beloved piece of legislation ever crafted – like an across the board Congressional pay raise – the language of the bill would have to be drafted.  Again, politicos have warned that this will be nearly impossible to do before the 2 August, 2011 “raise the debt limit or else” deadline.

However, the Gang of Six is not the only group of brains working toward a solution.  You might have heard that in the U.S. House of Representatives yesterday that a conservative budget balancing plan passed.  Senate Democrats have already said that they will not pass a version of this bill.  Not only that, but also Obama has said that he would veto this plan.

In other words, regardless of details, we are far from a specific deficit reduction plan.  Hence the “?” at the end of this post’s title.  However, as I said recently, the details of a plan are not the important part of any deal.  No, just that a deal passes is the important part.  Where are we on that?

It looks very likely to me that a deal will be reached before the 2 August, 2011 deadline.  It is also very likely that Congress can craft a deal that includes a debt ceiling rise vote to take place before the final language of a deficit reduction deal is agreed to.

All of this is in accord with the “Intuitive Assessment of U.S. Debt Crisis brief” that I wrote just last week.  I’ll keep you posted as to the details once they become less politicized and uncertain.

Jason