Economic Disaster Countdown to August

Reporting from The New York Times, “Economists, Wall Street analysts and political observers are warning that the concessions he made to fiscal conservatives could make it very difficult for Mr. McCarthy to muster the votes to raise the debt limit — or even put such a measure to a vote. That could prevent Congress from doing the basic tasks of keeping the government open, paying the country’s bills and avoiding default on America’s trillions of dollars in debt. The speakership battle that spanned more than four days and 15 rounds of votes suggested President Biden and Congress could be on track later this year for the most perilous debt-limit debate since 2011, when former President Barack Obama and a new Republican majority in the House nearly defaulted on the nation’s debt before cutting an 11th-hour deal. ‘If everything we’re seeing is a symptom of a totally splintered House Republican conference that is going to be unable to come together with 218 votes on virtually any issue, it tells you that the odds of getting to the 11th hour or the last minute or whatever are very high,’ Alec Phillips, the chief political economist for Goldman Sachs Research, said in an interview Friday. … Goldman Sachs researchers estimate Congress will likely need to raise the debt limit sometime around August to stave off such a scenario. … The exception to the debt-limit drama was the four years of Donald J. Trump’s presidency, when Republicans largely abandoned their push to tie increases in the limit to cuts in federal spending. In 2021, Senate Republicans clashed with Mr. Biden as the deadline for raising the limit approached, but those lawmakers ultimately helped Democrats pass a law increasing the cap. … Mr. McCarthy appeared to agree to those demands, pledging to allow open debate on spending bills and to not raise the debt limit without major cuts — including efforts to reduce spending on so-called mandatory programs, which include Social Security and Medicare — in a deal that brought many holdouts, including Mr. Norman, into his camp.”