It's crunch time -- way past crunch time, really -- in the debt ceiling/budget debate. While partisans are sharpening their knives in preparation of administering a deep, self-inflicted wound, markets are beginning to lurch around, tanking on bad news regarding the deal and visa-versa.
According to a GS research report from yesterday, consumer confidence in June took a hit from the impasse, and "a large rotation by individual investors out of equities and into bank deposits in recent weeks also is consistent with greater nervousness over the possibility of a looming crisis."
So damage is actively being done by the unwillingness of House GOP legislators to accept a deal. Not to mention the most damaging aspect of this: the opportunity costs of sole focus by policy makers on deficit reduction in an economy where un- and underemployment is 16%.
The latest lurch is a plan from the "gang of X" (I think it's six, but it was five for a while, which we liked because we got to call them "Five Guys," a burger chain in these parts). Read about it here if you want, but I wouldn't get too attached -- like I said, we're deep into Lurchville.
The latest plan if notable, however, because the gang is bipartisan, and their $3.7 trillion deficit-reduction plan includes $1 trillion in new revenue. So it raises an issue I've stressed from the beginning, that of balance: without significant revenue in the deal, there's too much weight on spending cuts, and that creates more pain than gain.
What's also notable this AM is that the people agree. According to a new Washington Post poll, 62% believe some combination of revenues and cuts is the best way to reduce the deficit. Even among Republicans, close to half -- 46%-agree. And -- take not elected officials -- among those highly-desired Independent voters, it's 64%.
This post originally appeared at Jared Bernstein's On The Economy blog.
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