Trump-Pelosi-Schumer Deal

On Wednesday, the stock market rallied slightly lowering the possibility of the first 3% selloff of the year occurring this week. Those who described the selloff on Tuesday as devastating because it was the worst day since August 17th look silly because a normal day wiped half of it away as the S&P 500 was up 0.31%. One of the reasons the stock market rallied is because Trump met with House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer to get a deal done on the debt ceiling. This was a twist in the issue as it was thought to play itself out over the next few weeks and it’s unusual for the two parties to agree on an issue so quickly.

Trump made the following statement on deal that was made. He said, “We agreed to a three-month extension on debt ceiling, which they consider to be sacred — very important — always we’ll agree on debt ceiling automatically because of the importance of it. Also, on the CRs and also on Harvey, which now we’re going to be adding something because of what’s going on in Florida. We essentially came to a deal. So we have an extension that will go out until December 15th. That’ll include debt ceiling, that’ll include the CRs, and it will include Harvey. The amount of money to be determined, because everyone is in favor, obviously, of taking care of that situation.” As you can see, the Harvey relief, the continuing resolution for the budget, and the debt ceiling increase will all be packaged together. FEMA is expected to run out of money by Friday which would be a disaster because hurricane Irma will start to effect Florida on Saturday.

That was the good part of the deal. The bad part is that the deal is only for 3 months, so we will need to revisit this story in December as the new deadline will be December 15th. Mitch McConnell supports this deal, but Paul Ryan criticized it for being too short before Trump came to the agreement. The rank and file members of both parties still need to be convinced of the deal, but it looks like the risk has been successfully kicked down the road for the second time this year. There is now a 51% chance the debt ceiling will be raised from September 9th to September 15th. The PredictIt market will need to set another betting series soon after this passed. This could be a positive signal that the Dems and the GOP will work together on tax reform, but that’s much tougher. On the other hand, it might make the debt ceiling an issue that doesn’t go away, preventing discussion on other issues like healthcare reform, tax cuts, and infrastructure stimulus.