As we've often mentioned, no one would ever describe Donald Trump as a classic Republican in a party political sense ..... his right-of-centre politics certainly have more in common with the broad views of the GOP than they do with those of the Democrats, but his obvious disdain for political elites and party structures mark him out as more of a natural independent. Nothing at all wrong with that, but since independents don't get elected President he landed up as the Republican candidate despite the ill-concealed discomfort of many of the party establishment.
Events since have proved that the old guard were right to feel a little anxious. Whether it's the Russian connections or the ongoing brawls with government agencies, his twitter rants or his apparent reluctance to speak against white supremacist organisations (stop now .... this list is too long), some important party figures have been left red-faced with both anger and embarrassment at the course of this administration. Yesterday's developments will have made their complexions an even darker shade of puce, especially those of Mitch McConnell and Paul Ryan.
Time will tell what the President's move to strike a deal with the Democrats, represented by Senate Minority Leader Charles (Chuck to his new mates) Schumer and House Minority Leader Nancy Pelosi, has done for the immediate career prospects of Senate Majority Leader McConnell and House Speaker Ryan -- nothing good, one assumes. The President's relationship with both has been strained to say the least, with Mr Trump accusing them of being both insufficiently loyal and weak in executing his agenda so far ..... well, it's obviously not his fault.
The prospect of failing to raise the US Government's debt ceiling promptly , with all the attendant ramifications of a government shut-down and missed interest payments to bondholders, has been an increasingly dark cloud for investors in recent weeks. In a move that seems to have come as a big surprise for senior Republicans, Mr Trump cut across party lines to secure Democrat backing for a short-term plan (until December) to fund the government and raise it's borrowing limit. As was always going to be the way, a deal was achievable by tying the debt issue into a bill with relief for the victims of Hurricane Harvey -- few politicians with a desire to remain in office are likely to be too keen to oppose that kind of legislation,
The snag for Republicans is that goes against their agreed party policy. Poor Mr Ryan, who by all accounts was abruptly over-ridden by the President during the Oval Office meeting, must be feeling particularly bruised. As the heavyweight party man in Congress, he was seeking an 18 month deal that would postpone any chance of the next bout of electorally poisonous impasses on the debt ceiling until after next year's mid-term elections. When that failed, as the chief Republican negotiator he was fighting for a deal for at least 6 months, saying that Democrats' position of wanting a short-term solution was "ridiculous and disgraceful", in effect playing politics with disaster relief. It was less than an hour later that the President curtly silenced the House Speaker and did the 3 month deal with the Democrats.
So what ? Surely the President is to be commended ..... this is the kind of decisive deal-making that he's good at. N. Korea still looms large and Hurricane Harvey is likely to be followed by the mega-storm Irma (and maybe Jose, too) , but at least Mr Trump has dealt effectively with the third major threat feared by investors, right ?
Well, yes ..... and no. It's something of a relief that the debt ceiling issue is no longer so immediate of course, but when all's said and done the problem has just been postponed until December. The merest possibility that the government might fail to make repayments when the coffers ran dry in early October had caused a spike in yields for Treasury Bills maturing around that time, a reflection of the increased risk factor. On Tuesday, the Treasury auctioned T. Bills maturing on October 5th and a yield of 1.3% was required to get them away, the highest yield on 4-week T.bills for 9 years and much higher than those maturing in the weeks before and after that date.
Now, that spike has just been pushed along the short-term yield-curve until mid-December, signalling that we'll probably have to go through the same process then and who knows which divisive issues may be attached to the bill next time round -- Mr Trump's Mexican wall, perhaps ? Republicans will also have to acknowledge that in reaching out to the Democrats, Mr Trump has given them a seat at the policy-making table that they didn't previously enjoy and strengthens their hand on issues like healthcare and "dreamers" -- the children of illegal immigrants.
Perhaps the biggest legacy of this deal may be the damage done to the trust between the President and the party that theoretically he represents, and therefore to the chances of getting desired legislation enacted. The administration's record on that is pretty dire so far, and this latest development seems unlikely to improve matters. If we ever get around to seeing Mr Trump's proposals on tax and infrastructure spending, that could count for a lot.
So at face value this deal is welcome, but it is categorically NOT a solution -- it's a sticking plaster, and it may come at a price.