Investor Poll Says Tax Hikes Needed; 60% Think No Budget Agreement by October 1; McConnell Wants Medicare Cuts Before Hiking Debt Ceiling

In a Bloomberg poll, 60% believe budget issues will not be resolved by October 1, the start of the fiscal year. Meanwhile the battle between Republicans and Obama lingers on.

Senate Minority Leader McConnell Seeks Cuts to Medicare and Medicaid in U.S. Debt-Cutting Talks, but Obama Wants Tax Hikes.

Senate Minority Leader Mitch McConnell said he wants �significant� near-term cuts in federal agency budgets paired with longer-term reductions to programs like Medicare and Medicaid in exchange for his support for a boost in the U.S. debt limit.

McConnell, a Kentucky Republican, said he will insist on big policy changes in the Medicare and Medicaid health-care programs to help restore the nation�s fiscal balance. He urged Obama to help specify adjustments both parties can embrace. Doing so now, with bipartisan support, would help nullify the policy changes as issues in the 2012 elections, he said.

�We can do something important for the country together, and this is the opportunity,� the top Senate Republican said. �That is the importance of this debt ceiling moment. It is the one time when we have to come together, and we need to come together to do something really significant.�

Republican support for any deficit-cutting plan is critical in both chambers. Republicans control the House, and while Democrats control 53 seats in the 100-member Senate, that�s well short of the 60 needed to end a filibuster that blocks legislation.

McConnell�s push for strict limits came as House Speaker John Boehner, an Ohio Republican, said he wants any deal to lean in favor of specific cuts to programs, including entitlement programs. He expressed skepticism about broad longer-term limits on debt, deficits or spending.

�I don�t want phony caps, I don�t want phony targets� because �Congress has found a way to wiggle out of them,� Boehner said. Congress must act now to curb spending, the speaker said, as otherwise �the markets will act for us very soon.�

Global Investors Say Tax Hike Needed to Cut U.S. Deficit

Please consider a Bloomberg Poll that shows Investors Say Tax Hike Needed to Cut U.S. Deficit

Global investors, by an almost 2-to-1 majority, believe the U.S. government won�t be able to substantially cut its budget deficit without raising taxes, rejecting a core stand of congressional Republicans.

Investors are also pessimistic about prospects for a deal to cut the federal deficit, a Bloomberg survey found. Almost 6 out of 10 doubt President Barack Obama and Republicans will reach an agreement by the start of the new fiscal year on Oct. 1, according to a quarterly Bloomberg Global Poll of 1,263 investors, traders and analysts who are Bloomberg subscribers.

�I don�t think raising taxes is a particularly good idea, but it might be the only option,� says Thomas Larsen, a trader at Nordea Treasury in Copenhagen and a poll participant.

Even with pessimism over a long-term deal, more than 7 of 10 poll respondents are confident Congress will raise the $14.29 trillion debt limit and stave off a default on U.S. obligations. The government will run out of options for avoiding default by about Aug. 2, according to Treasury Secretary Timothy Geithner.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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