The debt ceiling debate is over for the time being, but it sure doesn’t feel like it. President Obama, the House and the Senate agreed on a compromise that increases the debt ceiling by as much as $2.4 trillion dollars. On top of the $900 billion spending cut over the next ten years from federal programs, agencies and day-to-day expenditures, the agreement called for the formation of a special “super committee” that must identify further spending cuts by Thanksgiving. If this committee deadlocks or if Congress reject the committee’s recommendations, automatic across-the-board spending cuts of at least $1.2 trillion will go into effect.
Though the debt compromise is considered by most as sub-optimal, the alternative would have led to a U.S. default. Given the painful things that have already happened in the markets, who knows how much greater the pain would have been if, over the last week, we instead were watching the U.S. Treasury determine who would and would not get paid. In that scenario, I think we could have faced a downturn and volatility in the markets that exceeded 2008 and rivaled 1929. All this market turmoil does nothing to help entrepreneurs, particularly for ones seeking access to capital and other financial resources.
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Author:Ray Leach
