The U.S. House of Representatives must come to an agreement on raising the national debt ceiling today.
If they don’t reach a deal, the U.S. could default on its debt as soon as June.
Treasury Secretary Janet Yellen warns that this could set off a financial crisis, as the U.S. has never defaulted on its debt before.
Background
Democratic Congressman Jim Clyburn spoke about the importance of not compromising principles or the full faith and credit of the United States of America.
Democrats are not willing to agree to anything that would jeopardize social security and medicare, which are programs that American people have paid into.
The Economic Fallout
If lawmakers do not reach a deal, it could have implications on the economy.
A previous example of this occurred in 2011, where markets took a hit as the debt ceiling approached and the government couldn’t pay its bills.
The real pain will come if the threshold into default is crossed, as money will be temporarily sucked out of the economy and stocks are likely to plummet. This will come at a cost to American households and businesses and affect the workings of the economy.
Infighting Among Republicans
What’s unique about this situation is that there might be infighting amongst Republicans to get the deal over the finish line.
In the past, Democrats and Republicans would go toe to toe because of concessions.
Now, because the President controls the executive branch and has the Senate, they’re likely to stand firm.
It’s possible that moderate Republicans will sign on to Democratic proposals.
However, there’s disagreement among Republican members over exactly what their priorities are and they don’t want to pass a clean debt limit without future stipulations.
Conclusion
The outcome of the negotiations on the national debt ceiling is uncertain and the potential for economic fallout is real.
The stakes are high for American households and businesses, as well as the stability of the economy.
