With no movement on either side and the debt ceiling fast approaching, there’s increasing talk that the solution will be for Obama to issue an executive order and require the Treasury to continue paying US debt holders even if the debt ceiling isn’t raised.
Here’s Greg Valliere at Potomac Research:
HOW DOES THIS END? What worries many clients we talk with is the absence of a clear end-game. We think three key elements will have to be part of the final outcome: First, a nasty signal from the stock market. Second, a daring move from Barack Obama to raise the debt ceiling by executive order if default appears to be imminent. Third, a capitulation by Boehner, ending the shut-down and debt crisis in an arrangement between a third of the House GOP and virtually all of the Democrats.
Valliere isn’t the only one seeing this outcome.
Here’s David Kotok at Cumberland Advisors:
We expect this craziness to last into October and run up against the debt limit fight. In the final gasping throes of squabbling, we expect President Obama to use the President Clinton designed executive order strategy so that the US doesn’t default. There will then ensue a protracted court fight leading to a Supreme Court decision. The impasse may go that far. This is our American way. “Man Plans and God Laughs” says the Yiddish Proverb.
Indeed, back in 2011, Bill Clinton said he’s raise the debt ceiling by invoking the 14th Amendment, rather than negotiate with the House GOP.
This time around, again, Clinton is advising Obama to call the GOP’s bluff.
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