Debt Negotiations – Republican Debt Ceiling Proposal 💸

Debt Negotiations – Republican Debt Ceiling Proposal

After the midterm elections commenced a few months ago, we discussed how one of the biggest issues related to the economy in the sphere of politics would be the debt ceiling. Secretary Janet Yellen announced that the Treasury started to take extraordinary measures to pay off the government’s bills earlier this year and stressed that the debt ceiling needed to be raised by sometime around the summer or the US would default on this debt.

This isn’t America’s first rodeo with a debt crisis conflict, and one can blame the polarization of Congress. Republicans believe that government spending should be reduced, while Democrats believe in high levels of government spending on things like welfare, and this conflict in beliefs has been magnified.

Now that Republicans have control of the House, they have been attempting to get the Democrats to approve spending cuts as a negotiation tactic. On Wednesday, the House passed the Limit, Save, Grow Act of 2023 which proposed raising the debt ceiling in exchange for major cuts in government spending, with Democrats and Republicans voting along party lines. The bill is obviously not going to progress any further, but it was introduced to start a round of intense negotiations between President Biden and the Republicans as the deadline is approaching.

Leaders across the world believe that the US will not default on its debt, and that is a fair assumption given negotiations have always gone through. There has been increased activity in the bond market in preparation for something unexpected, but if the US truly does default it will go down in history as one of the largest political and economic failures.

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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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