Last night, US Treasury Secretary Jack Lew came out and said that the Treasury was close to exhausting its “extraordinary measures” that it has to keep funding itself (once it’s no longer able to issue new debt) and that the US WILL hit the debt ceiling on October 17 as planned.
This warning is unprecedented in that it’s coming in the middle of a tense government shutdown.
The growing conclusion is that this will not be a short one-or-two day shutdown (no real progress was made yesterday) and that it could extend all the way until the debt ceiling, which will force some kind of negotiation.
On Capitol Hill there were signs only of the two sides digging into their respective corners, with the House Republican Conference having what several sources described as their best conference in months after Speaker John Boehner’s demands to gut Obamacare prompted the budget impasse. And at a private Democratic lunch in the Senate’s ornate Mansfield Room, speaker after speaker heaped praised on Reid for his no-compromise stand, attendees said.
And increasingly, the two policy disputes — raising the debt ceiling and keeping the government funded in the new fiscal year — seemed bound to become tied together.
“It will all get solved at one time,” said Sen. Tom Coburn (R-Okla.).
There’s good and bad news.
The good news is the action is starting now, and the market and the outside world has been forced to focus on this, thanks to the fact that the government is (partially) closed. That means pressure begins soon in getting a deal.
The bad news is that this turns into one giant big bang. As Paul Ryan has said, by rolling it all together, the GOP gets maximum leverage.
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