Debt-Ceiling Déjà Vu Worries Wall Street
Big stakes ahead of debt-limit talks
If Treasury Secretary Janet Yellen is correct, there are just a few precious weeks remaining for Congress and the White House to reach a debt-limit accord and avoid “an economic and financial catastrophe.” That makes Tuesday’s meeting between President Biden and Speaker Kevin McCarthy all the more pivotal as a deadline looms for the U.S. to potentially run out of cash.
Don’t expect any major breakthroughs from the White House talks. Representative Patrick McHenry, Republican of North Carolina, said this weekend that he was feeling a level of “modest pessimism” that a deal would get done in time to avoid a messy default.
The differences between Congress and the Biden administration are vast. Republicans want to reduce the country’s $31.4 trillion debt through spending cuts, while the White House views tax increases on companies and wealthy Americans as the best way to reduce the burden.
The last big debt-ceiling crisis rollicked stocks. In 2011, the S&P 500 fell when S&P Global, the ratings agency, downgraded the nation’s credit rating a few days after the Obama administration and Republicans reached a deal. This year, investors seem to be betting that lawmakers will reach a last-minute agreement, or at least temporarily lift the debt ceiling (Mr. McHenry didn’t rule this out). Despite a banking crisis and recession fears, the S&P 500 is up 8 percent in 2023.
Source: The New York Times
