Sean West is the Eurasia Group analyst who nailed the Fiscal Cliff, predicting early on that they would have a deal, while others were sceptical.But he has always worried that the Debt Ceiling would be much harder.
But lately, markets have been shaking off debt ceiling fears, and more conservatives (Newt, the Koch Brothers, etc.) have been telling the GOP to not plant a flag at the debt ceiling.
We asked West his opinion on the matter now
I think the debt ceiling is a loser for the GOP and they know it. My fear is not of technical or actual default. It’s of continued short extensions–a continuous kick the can punctuated by moments of panic. The chance of either the sequester or a shutdown for a brief period is real and higher than the risk of cliff crisis ever was, even if it’s still not my base case. There’s no process for negotiation, incentives are not aligned and a lot of the deficit reduction low hanging fruit has been eaten–all of that makes it very challenging to see a straightforward path through the next 90 days even if there’s no acute crisis.
The GOP knows its debt ceiling strategy is a loser.
The Continuing Resolution — passing the next budget — is still a big problem. The sequester is also real, as Goldman is warning about.
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