All Eyes on the U.S.

The House is headed for a big vote on Thursday to decide on Republican Speaker John Boehner’s revised debt plan. The decision will go a long way in determining if the U.S. government is able to avoid a default by next week. If the plan does pass in the House, the Senate Majority Leader, Harry Reid, will put it to a vote in the Senate (hoping to defeat it). He could then opt to push his own plan through or make certain changes to Boehner’s plan that are more acceptable to Democrats. As it stands, Boehner’s plan will raise the debt ceiling in two steps: (1) $900 billion now, while cutting $917 billion in spending and (2) $1.6 trillion next year, while cutting $1.8 trillion in spending. The two-step process is opposed by Democrats and many Republicans who do not wish to see this vicious debate take place all over again in 2012 during the election year. At least 18 House Republicans have said they would oppose Boehner’s plan (he can’t lose more than 23 Republicans if all Democrats vote against his plan). If Boehner’s plan does fail, the Democrats say their leverage will dramatically increase (probably true). Harry Reid has proposed a one-step process to raise the debt ceiling by $2.7 trillion and cut spending by that same amount (note that the Congressional Budget Office recently found that his plan only cuts about $2.2 trillion at the moment, but he intends to get his up to $2.7 trillion by the time Congress would vote on it).

It’s difficult to predict which plan will pass, if any. You would think the threat of a U.S. default would encourage cooperation and collaboration. Yet the U.S. sits on the brink of default. The CEO of Dow Chemical, Andrew Liveris, recently stated that Europe views America as a "bit of a laughingstock." Let’s hope we prove them wrong.