Investors on Wall Street are bracing for the prospect of a protracted, costly standoff in Washington over the debt ceiling, underscoring the economic risks as House Republicans prepare to vote on new legislation as soon as Wednesday.
In recent weeks, two key developments — including a drop in yields on government bonds set to mature imminently — have suggested a growing panic that the GOP’s demands could cause the country to default, touching off what analysts widely believe would be another U.S. recession.
This year, McCarthy has maintained that Republicans hope to avoid default. In a speech at the New York Stock Exchange last week, he blamed Biden, who has refused to negotiate out of a belief that the debt ceiling should be raised without conditions to prevent any disruptions to the fragile U.S. economy.Two days later, McCarthy unveiled legislation that he said would preserve U.S. credit and slow the accumulation of debt.
“Speaker McCarthy’s been at the table. And he has offered to negotiate with the president. Now we’re going to put our terms on a piece of paper, get 218 Republicans, and we’re going to put the ball in their court,” said Rep. Jodey Arrington , the leader of the House Budget Committee, in an interview on Fox News.But the precarious political environment has not been lost on Wall Street, where investors began to raise alarms shortly after McCarthy’s speech.
“We think that non-withheld tax receipts so far still lean slightly in favor of a late July deadline, but it would take only a few days of slightly weaker tax collections to tip the deadline to early June,” the analysts at Goldman Sachs wrote in their April 19 note.
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