Plus, market turmoil would itself come at a cost, potentially cascading to slow the broader economy. The catch: Markets have become used to long debt limit debates, and some on Wall Street think that investors may not react enough to lead to a deal before the X-date. Politicians have suggested in private that it could take severe turmoil in financial markets to elicit a deal this time around. In 2011, lawmakers allowed the debt limit debate to get down to the wire, and then agreed to raise the debt limit at the last minute. Without a timely deal, markets could be in for a wild ride as the nation stares down a period of brinkmanship.
Given where both sides stand now, that seems unlikely. If House Republicans agree to the White House’s no-strings-attached stance, or if the White House agrees to some spending cuts, a deal could be struck without severe market disruptions or special congressional maneuvers. President Biden will meet with top Republicans and Democrats at the White House on Tuesday to discuss a path forward.
The Biden administration has dug in on the other side, insisting that it will only accept an agreement without spending cuts. The debt limit was raised this way three times during the Trump administration and dozens of times during past presidencies.īut House Republicans have made clear that they want stipulations in the form of spending cuts attached to this next debt limit increase. The simplest resolution would be to cleanly pass an agreement to raise or suspend the debt limit before the United States runs out of cash.
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