Obama Secures Budget Truce


Legislation which removes the threat of a government debt default and eases spending caps passed in congress on Friday. This should allow President Obama to finish out the remainder of his final term without the possibility of catastrophic of a default on U.S. debt hanging over his head.

Budget Adjustments

The vote came back at 64-35 for the cobbled together solution, after intense negotiations between the White House, retiring speaker Boehner, and other congressional leaders.

The two year budget should allow for new spending initiatives from Congress for the current and next fiscal year, and will take effect retroactively from October 1, 2015, another nice little fudge, and will provide an additional $80 billion in spending for domestic and military programs.

The $80 billion still needs to be shifted around from other areas of the budget before the next deadline of December 11, when the current government spending limit expires. Despite the fact that the administration is claiming success, the number of disagreements that may evolve from these re-allocations, could end up with Obama getting once again distracted, as Congress squabbles over exactly where these additional funds come from.

IMF Advises Caution

The budget news came in the wake of Federal Reserve announcing on Wednesday that the decision on raising the borrowing rates will be postponed, but pointed to the next decision happening as early as in December.

The International Monetary Fund took the opportunity on Friday, to once again warn the Fed about rushing into the decision to raise the rates. It said that a premature move could result in the Fed having to reverse the decision at a later date, and in an election year, harming the Fed’s credibility in the process. A rise in rates could also push the dollar even higher, damaging U.S. exports.

The change, once made, is likely to have global consequences, as it will probably trigger an immediate shift in investment portfolios on a global level, and increase market volatility.


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