Republicans Fool Markets With Debt Ceiling “Deal”

The Wall Street Journal scooped the details of what John Boehner would sell to his conference at a 10 a.m. meeting: a six-week extension of the debt limit (right up to Thanksgiving!) with “no policy conditions.”* The Dow Jones immediately spiked by 200 points, interpreted as a response to this “breakthrough.”

But how much of a breakthrough is it? The politics of the CR and the debt limit have gotten tangled; no one’s knocking investors if they haven’t followed every bend and turn. The House GOP still wants more from the CR than the administration will agree to, but outside groups like Heritage Action have signed off on the idea of a “clean” debt limit increase for a few weeks. Doing so would, like the “mini-CRs,” remove one of the ongoing outrages that hurts the GOP. The theory: This will give Republicans and Democrats the time and space to negotiate a long-term spending deal, something that they couldn’t do in 2011, when there was far more political pressure on the president’s party.

Hey, it might work. But the markets are currently thrilled by a deal that 1) has yet to be agreed to by the House of Representatives, 2) may merely kick the debt limit crisis back to Thanksgiving, and 3) at the absolute best presages a spending deal Wall Street can only guess the details of.

*Correction, Oct. 10, 2013: This post originally misstated the length of the proposed debt limit extension as six months.