GDP grew an estimated 1.3% and 0.4% in the last two quarters according BEA. This should be a warning to Congress that it’s past time to stop fooling around and pass a clean debt limit increase.

It should be clear to everyone that we are dangerously close to slipping into negative GDP growth and a possible second recession even without the threat of default and a revised credit rating. Any short disruption in consumer spending, job growth, or government finance could get the dominoes falling again.

There are two paths forward now. Congress can come together on a bill that will raise the debt limit and change the deficit trajectory all in one swoop. Or Congress can pass a debt limit increase bill and then deal with the deficit trajectory starting soon after. This late in the game and with the two sides not able to come together at all, the second option looks a lot more feasible.

In the short term we can avoid a downgrade of our credit rating with simply an increase in the debt limit and no default. To anyone thinking that our politicians will simply stop there and do nothing about the deficit we have the statement from Moody’s to force our hand. We can preserve our credit rating only temporarily. We’ll still be on the hook to come to a feasible plan on spending and revenues.

As it is the GOP House is trying to push through a bill that clearly won’t pass the Senate or survive a veto. Leader Reid is is pushing through a bill that won’t make the House happy either. Both bills will be harmful to our economic growth either way.

If I had my way I’d push through the clean debt limit increase today, take a few days off for the weekend, and then get leadership together early Monday morning and start hammering out a real compromise bill that will change our deficit trajectory without harming economic growth at a time when it’s already grinding to a halt.

I can dream, can’t I?


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