WASHINGTON — There's one way to force President Joe Biden and Congress to solve the looming crisis over the debt limit: a financial market crash.
Republicans and Democrats have been dancing around each other about the need to raise the government's legal borrowing authority. Biden tried to edge closer on Thursday by releasing his budget plan that cuts deficits by $2.9 trillion over 10 years, an offer that House Speaker Kevin McCarthy, R-Calif, quickly dismissed as woefully insufficient. Republicans in the House Freedom Caucus on Friday proposed their own demands, which the White House quickly rejected.
National News Biden rolls out budget plan, challenges GOP to follow suit "Every single major economic institution, conservative, liberal, says that will cause a massive recession, a massive recession, and put us in the hole for a long, long time," Biden said of the possible default as he rolled out his budget in Philadelphia.
But McCarthy's leverage is greatest as the"X-date" approaches at some point this summer and markets are biding their time. So far this year, the S&P 500 stock index has been positive. It has largely swung based on moves by the Federal Reserve to lower inflation or with the collapse Friday of the Silicon Valley Bank, events that are separate from the debt ceiling.
Analysts at Morgan Stanley a few weeks ago concluded that the most likely"catalyst" to an agreement would be the markets expressing their"fear" of the political and economic"repercussions of default." And there are those who think that Congress might not take the path that would trigger a market revolt.