Boehner Humiliated, Cancels Vote, Stock Futures Tank; Stocks and Treasuries Unusually Correlated

Thursday morning Bloomberg reported House Majority Leader Cantor Predicts House Republicans Will Pass Debt Plan Today

House Majority Leader Eric Cantor predicted Republicans would pass a debt-limit increase plan today as some freshman lawmakers pledged support for the measure in the face of unified Democratic opposition in the Senate.

Vote Cancelled

Kiss that prediction of Cantor goodbye. Thursday evening Republicans put off vote on debt limit because Boehner clearly lacks the votes.

An intensive endgame at hand, Republican leaders abruptly postponed a vote Thursday night on legislation to avert a threatened government default and slice federal spending by nearly $1 trillion.

"The votes obviously were not there," conceded Rep. David Dreier, R-Calif., after Speaker John Boehner and the leadership had spent hours trying to corral the support of rebellious conservatives.

The decision created fresh turmoil as divided government struggled to head off an unprecedented default that would leave the Treasury without the funds needed to pay all its bills. Administration officials say Tuesday is the deadline for Congress to act.

Senate Democrats stood by to scuttle the bill -- if it ever got them -- as a way of forcing Republicans to accept changes sought by Obama.

Based on public statements by lawmakers themselves, it appeared that five of some two dozen holdouts were from South Carolina. The state is also represented by Sen. Jim DeMint, who has solid ties to tea party groups and is a strong critic of compromising on the debt issue.

Others said conservatives wanted additional steps taken to try to ensure that a constitutional balanced-budget amendment would be sent to the states for ratification. As drafted, the legislation merely requires both houses of Congress to vote on the issue.

Even before the House voted, Reid served notice he would stage a vote to kill the legislation almost instantly.

"No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now," he said.

Boehner Humiliated

Boehner was humiliated and justifiably so. He had nothing to gain and everything to lose by attempting to ram-rod a gaseous bill through the House that was guaranteed dead-on-arrival in the Senate.

Majority leader Cantor made matters worse by predicting passage.

Stock Futures Tank in Unusual Correlation with Treasuries

Please consider U.S. S&P 500 Futures Retreat as McCarthy Says No Vote on Debt Plan Tonight

Futures on the Standard & Poor’s 500 Index fell after the U.S. House of Representatives postponed a vote to increase the nation’s debt limit, boosting concern that the lawmakers are far from an agreement to avoid default.

S&P 500 futures expiring in September lost 0.8 percent to 1,286.9 at 12:28 p.m. in Tokyo. The decline suggests the U.S. equity benchmark may extend its 3.3 percent slump from the past four days when markets open in New York.

Stocks and Treasuries are moving in tandem twice as often as they normally do, a sign investors are growing convinced the U.S. will lose its AAA credit rating and that an impasse among lawmakers may spur losses in both markets. The S&P 500 has risen or fallen together with 10-year Treasury notes 80 percent of the time in the last 10 days, compared with the average since 2000 of 41 percent, according to data compiled by Bloomberg.

Not Raising the Debt Ceiling Would be Blessing

I am sticking to what I said in Not Raising the Debt Ceiling Would be Blessing; Debt Limit Analysis; Interactive Map, You Decide What Not To Pay

All things considered, especially since Boehner's credibility is gone in his latest gaseous proposal, the best thing for Congress to do would be to NOT hike the debt ceiling and work out a credible plan over the next month.

Is Mish a "closet Liberal-humanist?"

In response to that post I received a humorous email from "BC" who wrote...

Mish, your choices reveal your empathy! Are you a closet Liberal-humanist?!

Your choices favor the elder working class, the working-class and poor ill, unemployed, poor and "food challenged", and imperial legionaries and auxiliaries against the corporate-statists!!!

Are you one of those maladjusted working-class types who just doesn't "get it"?!

Wink , wink ;-) ;-).

To see my choices as to what I would cut and to make your own choices about what to do if the debt ceiling is not raised, click on the above link for an interactive map.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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