Treasury has said the August 2 is the “drop dead” date for getting a debt ceiling deal. The GOP, as reported by today’s WSJ, thinks this date is meaningless.
We mentioned this last night, but we wanted to reiterate a point made by Bofa’s Ethan Harris in his note: How To Dismantle A Fiscal Bomb.
There is one good reason to think it might not get that far.
Our baseline forecast assumes a budget agreement is reached in the eleventh hour without triggering a markets crisis. As luck would have it, the Senate is scheduled to go on holiday just six days after the August 2 debt-drop-dead date. Nothing concentrates the mind of a Congressman like the prospect of an August recess. Our hope is that fear of lost vacation days will be a more effective motivator than the markets.
We’ll see if ultimately, in the end, a desire to hit the beach is what saves America from default.