Can This Cowardly Debt Deal Get Through Congress?

It looks like we have an agreement “in principle” between McCarthy and Biden, the details of which are sure to be underwhelming for both sides of the aisle.

As Greg Price wrote on Twitter yesterday:

“Sources on Capitol Hill tell me the debt ceiling deal McCarthy negotiated with Biden includes no legitimate spending cuts or significant reforms in exchange for a $4 trillion debt ceiling increase. Just a freeze next year followed by 1% increase in ‘25 adjusted for inflation. Text of the bill to be released tomorrow and a final vote on Wednesday. Total garbage considering the leverage the GOP conference had here.”

He’s right. The bill, as it looks to be shaping up, looks like the worst of both worlds: a deal is getting done and the GOP is giving up a ton of leverage that they had, which I wrote about at length here. I had suggested major cuts or a default, but predicted a weak-ass compromise, which is what it appears we have gotten.

But as Reuters noted yesterday, “the deal still faces a difficult path to pass through Congress”. So we’ll start to see how that landscape shapes up in coming days.

With Janet Yellen moving the date of no return for the U.S. Treasury to June 5th on Friday, it appears Congress has several more days to get their respective bases on board to vote for the deal.

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Regardless of if a deal gets done, I wrote last week that the U.S. is basically already in default. I wrote that the idea being pushed by both parties — that a default would be catastrophic for markets — is meaningless for several reasons. First, we’ve been in a perpetual state of “default”, as measured by unsustainable fiscal and monetary policy, for decades now. Second, the shock to our financial system that would result from finally calling our ongoing default by its name publicly, is long overdue and could oddly be one of the best things that could happen to us. And I’m not trying to be sensational, I swear. You can read my full thoughts here.

Last week I also published a great piece by my friend Chris DeMuth, Jr., wherein where he would put “all of his money today”. In the article, Chris asks himself: “what would I do if I had to expose all of my money to a single currency or commodity today?”

This month I also wrote about why the notion of the U.S. not going into a recession is, in my opinion, complete and total fantasy. Personally, I am bracing myself for an incoming recession. What it means for markets, I wish I could tell you, other than it just feels to be a risk-off environment — yes, despite the massive NASDAQ short squeeze we saw this week — and here’s what I have in my portfolio.

As I wrote, I’m certain of one thing: when we look back half a century from now, it’ll be clear that our arrogance to think we never have to stomach uncomfortable solutions will have been our nation’s monetary and economic undoing.

Here’s some more of my most recent posts from 2023:

Fringe Finance archive access:

QTR’s Disclaimer: I am not a guru or an expert. I am an idiot writing a blog and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning and generally trade like a degenerate psychopath. This is not a recommendation to buy or sell any stocks or securities or any asset class - just my opinions of me and my guests. I often lose money on positions I trade/invest in and I’m sure have lost more than I’ve made in my time in markets. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. Positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it three times because it’s that important.

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