Will it take market crash for Congress to raise debt limit?

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What might it take to get President Joe Biden and Congress to reach a deal on raising the debt limit.

, 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.

“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. There is a widening recognition that a massive sell-off tied to debt limit tensions would provide instant clarity and snap everyone out of their ideological stagnancy. No one is rooting for the markets to sink, but as Republican lawmakers weigh the possibility of prioritizing repayments to debt holders — a risky short-term fix — there is a sense that markets need to jolt Congress into action.

When lawmakers realize they can step in with a deal and play the hero to salvage everyone’s retirement savings, they will have an incentive to come together, said Singh, who spoke at a New York City conference two weeks ago. Rohit Kumar, a former aide to Senate Minority Leader Mitch McConnell, R-Ky., said a market drop would “move the needle” on a debt limit deal, but it's not a “prerequisite" for getting an agreement.

 

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