Did The Debt Ceiling Battle Just End?

Washington, DC

Earlier we mentioned that the WSJ was touting progress on a debt ceiling deal.

That theme is echoed today by POLITICO’s Morning Money:

Congressional leaders of both parties meet at Blair House at 10:00 a.m. with Vice President Joe Biden amidst signals the kind of deal long envisioned by Treasury Secretary Timothy Geithner and some other administration officials (enforceable deficit reduction targets and a punt on entitlement programs till after 2012) appears increasingly likely. …

The remarkable shift in the debate follows voter unease with House Budget Committee Chair Paul Ryan’s plan to overhaul Medicare and a sharp increase in President Obama’s political standing following the killing of Osama bin Laden … Precise details (spending cuts vs. tax hikes) will take time to work out but the result should be a combined vote by summer break on deficit reduction targets and an increase of $2 trillion or so in the $14.29 trillion debt ceiling.

So obviously, suddenly the mood in DC has shifted.

We’re sceptical. Everything we’ve heard — both through the media, and directly from the hard right in the GOP Congress — is that there won’t be a deal.

Don’t expect a huge market reaction. The market never reacted when things were looking more fractious.