From Goldman’s Alec Phillips:
Endgame: A short-term increase, with another shot at deficit reduction later this year? A two-stage process continues to look like the most likely agreement, since it is very difficult to generate savings of the magnitude being discussed without developing more complex policy reforms in a number of areas, including health programs and potentially tax policy, and those would take time. It is possible that negotiators could try to reduce the uncertainty around the second debt limit increase that the House plan would create, but in doing so an alternative enforcement mechanism for the commission process would need to be identified, which might create more controversy.
Timeline: Senate floor consideration has started, House moving forward for Wednesday vote. The Senate began consideration today of a debt limit increase this afternoon. At this point the bill is unlikely to come up for a vote before Thursday. House leaders are expected to bring up their bill by Wednesday for a vote. There is a possibility of amendment to either proposal prior to those votes. Moreover, after each chamber passes its respective bill, it can be amended by the other chamber. The stated deadline for enacting a debt limit extension is August 2. Although the usual legislative timeline can take up to 8 days for House and Senate passage, if a deal is reached it can be expedited (as it was in April, when a deal to avert a shutdown was reached the evening of April 8th, and was enacted only a few hours later around midnight). While there is a clear risk that legislative consideration goes past the August 2 deadline, a deal still seems more likely to be enacted just ahead of the deadline. In the less likely scenario that the deadline is missed, spending would be cut sharply but the lapse in borrowing authority would very likely be brief and would almost certainly be resolved prior to the August 15 Treasury coupon payment.
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