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Don’t Believe What You Hear About the Budget Talks

It also seems to have gotten worse since April, when 59 House Republicans defied their leadership and voted against the final continuing resolution for fiscal 2011.

Given that a debt ceiling increase is even more politically toxic than the CR, its likely that anything Boehner might agree to while playing golf with the president or Cantor agrees to as part of the Biden-led summit wont be acceptable to large numbers of the House GOP caucus.

The same is true on the other side of the aisle because its not clear that an administration-negotiated deal will be acceptable to all Democrats.

This is especially the case now because the presidents Osama bin Laden bump in the polls is over and his approval rating again is hovering between 46 percent and 49 percent.

In addition, its becoming increasingly obvious to many that the almost guaranteed opposition by a substantial number of Republicans to a debt ceiling increase means that no bill can pass the House without substantial Democratic support. That math will prevent the president from agreeing to the type of budget agreement the GOP says it must have.

On top of everything else, there are strong indications that, contrary to initial statements by some on Capitol Hill, Wall Street will react negatively and that what so far has been limited pressure on Members of Congress to raise the debt ceiling will be substantially different in the not-too-distant future.

In recent weeks two of the three agencies that Wall Street relies on for bond ratings Moodys and Fitch both issued warnings about the implications of not increasing the governments borrowing limit.

Last week, Federal Reserve Chairman Ben Bernanke used some of the strongest language he has ever used when talking about fiscal policy to say that the debt ceiling should not be tied to deficit reduction.

The continuing threat of a default by Greece has clearly concerned investors. If worry about a country whose gross domestic product is almost a rounding error compared to the U.S. economy can roil the markets, what will a growing hint of a similar problem by the United States do?

Finally, there is the growing recent concern about the U.S. economic recovery and the worry about the effect of short-term deficit reductions on the GDP and unemployment that is increasingly in vogue.

This is why, like the calls I received when the Andrews summit got under way, much of whats being said about a possible budget deal needs to be heavily discounted.

The current discussions may have been going on for a while, but in many respects, its still way too early in the process to think that anything has been decided.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of The Guide to the Federal Budget.

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