Performance Art

The Credit Strategist Blog

Kevin McCarthy was finally elected Speaker of the House on the 15th ballot early this morning after four days of voting that exposed deep rifts in a Republican Party suffering from the toxic influence of Donald Trump. The problem is the speakership Mr. McCarthy will fill is nothing like previous speakerships. In order to prevail, Mr. McCarthy traded away most of the perquisites of power and then groveled before former Trump and one of his main detractors, Rep. Matt Gaetz (R-FL), in his “victory” speech (which just as easily could be termed a concession speech). The new Speaker is now one vote away from being tossed out at the whim of a single legislator. Control of the House, and the stability of American government, hangs by a thread.

The biggest potential problem this poses comes later this year when Congress votes to increase the debt limit. Among the biggest issues Mr. McCarthy’s opponents care about is runaway debt and deficits and are likely to oppose (or extract a high price) for their votes to lift the debt limit. Failure to lift the debt limit will prevent Congress from paying bills and trigger default on America’s towering federal debt. Gaining 218 votes will be difficult and may require Democrats to cross the aisle to compensate for any lost Republican votes. However the issue plays out, it could well go down to the wire and shake markets.