7/20/2011 10:21:00 PM
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Obama heralds progress on debt deal
KEVIN CARMICHAEL
WASHINGTON— From Wednesday's Globe and Mail
A flicker of hope was all it took to make investors feel better about the U.S. political process.
Stock and bond prices rallied Tuesday after President Barack Obama endorsed a new bipartisan proposal to ease the country’s debt burden, as investors bet politicians would raise the legislative borrowing limit before the Aug. 2 deadline and avoid default.
The new budget plan, put forward by a small group of Democratic and Republican senators, was short on detail and would need to pick up support in the House of Representatives to have a serious chance of gaining traction.
Still, after daily talks at the White House last week appeared to do little but harden opposing positions, the mere scent of compromise was enough to change the mood on Wall Street.
Stocks took off after Mr. Obama made a surprise appearance in the White House press room, saying the latest proposal to end the debt impasse was “balanced” and on the “same playing field” as what the White House has been seeking.
The Dow Jones industrial average climbed more than 200 points, its biggest jump this year. The S&P 500 index gained 1.6 per cent to 1,326.73, rebounding from a three-week low on the biggest one-day rally since March. Bond prices, which move inversely to yields, climbed as hopes grew for a breakthrough in the debt-ceiling impasse. The yield on 30-year bonds dropped 0.12 percentage point to 4.19 per cent.
“It’s time to get down to the business of actually solving this problem,” Mr. Obama said. “We now are seeing the potential for a bipartisan consensus around what that would take.”
Mr. Obama’s optimism was rooted in a $3.75-trillion (U.S.) debt-reduction plan by a group of Democratic and Republican senators known in Washington as the Gang of Six.
The senators have been working on bridging the divide between their two parties for months, but appeared to have all but given up after Republican Tom Coburn of Oklahoma quit the group in mid-May.
Mr. Coburn was back in the fold on Tuesday, telling reporters the Gang of Six plan had been tweaked to add more than $100-billion in cuts to health care programs. (On Monday, Mr. Coburn released his own deficit-reduction proposal, suggesting cuts to spending and tax breaks that would reduce the budget gap by $9-trillion over 10 years.) The Gang of Six kept details to a minimum as they gave their colleagues in the Senate time to review its blueprint. The plan would seek to narrow the deficit immediately by $500-billion. Eventually, the Gang of Six would cut discretionary spending and the defense budget, contain the rising costs of Medicare and Social Security and kill tax breaks worth about $1-trillion.Read more....
Stock and bond prices rallied Tuesday after President Barack Obama endorsed a new bipartisan proposal to ease the country’s debt burden, as investors bet politicians would raise the legislative borrowing limit before the Aug. 2 deadline and avoid default.
The new budget plan, put forward by a small group of Democratic and Republican senators, was short on detail and would need to pick up support in the House of Representatives to have a serious chance of gaining traction.
Still, after daily talks at the White House last week appeared to do little but harden opposing positions, the mere scent of compromise was enough to change the mood on Wall Street.
Stocks took off after Mr. Obama made a surprise appearance in the White House press room, saying the latest proposal to end the debt impasse was “balanced” and on the “same playing field” as what the White House has been seeking.
The Dow Jones industrial average climbed more than 200 points, its biggest jump this year. The S&P 500 index gained 1.6 per cent to 1,326.73, rebounding from a three-week low on the biggest one-day rally since March. Bond prices, which move inversely to yields, climbed as hopes grew for a breakthrough in the debt-ceiling impasse. The yield on 30-year bonds dropped 0.12 percentage point to 4.19 per cent.
“It’s time to get down to the business of actually solving this problem,” Mr. Obama said. “We now are seeing the potential for a bipartisan consensus around what that would take.”
Mr. Obama’s optimism was rooted in a $3.75-trillion (U.S.) debt-reduction plan by a group of Democratic and Republican senators known in Washington as the Gang of Six.
The senators have been working on bridging the divide between their two parties for months, but appeared to have all but given up after Republican Tom Coburn of Oklahoma quit the group in mid-May.
Mr. Coburn was back in the fold on Tuesday, telling reporters the Gang of Six plan had been tweaked to add more than $100-billion in cuts to health care programs. (On Monday, Mr. Coburn released his own deficit-reduction proposal, suggesting cuts to spending and tax breaks that would reduce the budget gap by $9-trillion over 10 years.) The Gang of Six kept details to a minimum as they gave their colleagues in the Senate time to review its blueprint. The plan would seek to narrow the deficit immediately by $500-billion. Eventually, the Gang of Six would cut discretionary spending and the defense budget, contain the rising costs of Medicare and Social Security and kill tax breaks worth about $1-trillion.Read more....
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