The Retractable (Debt) Ceiling
The clock is ticking on US debt ceiling negotiations.
Treasury Secretary Yellen informed Congress that cash
balances are estimated to run out by early June, the socalled X-datei
. With the deadline fast approaching, markets
are sending signals about investor concerns. Treasury bills
with maturity dates in mid-summer are seeing higher
yields. While there is no playbook on how this showdown
will unfold, sadly, this is not our first rodeo either.
We have been here before
Since the enactment of the debt ceiling in 1917, Congress
has voted 102 times to either raise or suspend the limitii.
This has taken place under both Democrat and Republican
control.That’s not to say things have gone smoothly in the
past either.
In 2011, the debt ceiling debate went so far that the credit
rating agency, Standard & Poor’s, downgraded the USS
credit rating to AA+ from AAAiii. Standard & Poor’s cited
the growing deficit and the prolonged debate as the
reasons for the downgrade.In 2013 and 2018, debt ceiling
standoffs led to government shutdowns. Each standoff,
showdown, and shutdown led to short-term market
disruptions for days or weeks and subsequently recovered.