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Speaker 1: From Bloomberg News and iHeartRadio. It's the big take. I'm

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Speaker 1: west Kasova today the fight to stop a US debt default.

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Speaker 1: If you've been following all the news lately about Republicans

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Speaker 1: and Democrats arguing over raising the thirty one point for

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Speaker 1: trillion dollars US debt limit, you might be saying to yourself,

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Speaker 1: just wake me when it's over. And frankly, you'd be

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Speaker 1: forgiven for thinking that, because we have been here before.

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Speaker 1: In twenty eleven, just like now, Republicans and congress were

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Speaker 1: demanding big spending cuts from a Democratic president, Barack Obama

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Speaker 1: in exchange for voting to increase the limit and avoid

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Speaker 1: a debt default. Right now, the House of Represented is

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Speaker 1: still trying to pass a bill that a majority of

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Speaker 1: Republicans and Democrats in the Senate have already said they

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Speaker 1: won't vote for, holding our economy captive to Washington politics

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Speaker 1: once again. What's clear now is that any solution to

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Speaker 1: avoid default must be bipartisan, and in the end, under

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Speaker 1: enormous pressure from the public and Wall Street to take action,

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Speaker 1: they reached a deal at the very last minute. Senate

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Speaker 1: Democrats and Republicans say they've struck a deal to avoid

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Speaker 1: a looming economic disaster. The agreement will temporarily raise the

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Speaker 1: debt ceiling through early December. Variations of this same script

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Speaker 1: have played out again and again since then, and in

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Speaker 1: each case a deal was struck in the nick of

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Speaker 1: time to prevent the unthinkable, the US not making good

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Speaker 1: on its debts and all the global economic mayhem that

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Speaker 1: would result. If the US doesn't raise the borrowing limit

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Speaker 1: and defaults on its debt for the first time in history,

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Speaker 1: it could have devastating consequences for the economy, including a

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Speaker 1: possible recession and a lot of people thrown out of work,

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Speaker 1: and it would shake the world's faith in US treasuries

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Speaker 1: as safe and reliable. This time, Republicans in the House,

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Speaker 1: led by Speaker Kevin McCarthy and urged on by a

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Speaker 1: group of hard right members who say they'll risk a

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Speaker 1: debt default, are once again refusing to budge unless President

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Speaker 1: Joe Biden agrees to spending cuts. I don't know if

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Speaker 1: you have any children, but if you hadn't a child,

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Speaker 1: and you gave him a credit card and they kept

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Speaker 1: raising it and they hit the limit, so you just

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Speaker 1: raised it again, clean increase and again and again, would

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Speaker 1: you just keep doing that, or would you change the behavior?

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Speaker 1: Why wouldn't we sit down now and change this behavior.

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Speaker 1: Biden says he won't cave to their demands, and the

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Speaker 1: very notion that we would default on the safest, most

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Speaker 1: respected debt in the world is mind boggling. I'm not

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Speaker 1: going to get into their reckless threats to take the

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Speaker 1: economy hostage. I won't let that happen. And yet the

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Speaker 1: general action and much of Washington in the financial world

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Speaker 1: this time around, has been kind of a collective shrug.

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Speaker 1: Many people just seem to assume Biden and McCarthy will

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Speaker 1: ultimately pull back from the brink, so there's no need

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Speaker 1: to get tied up in knots worrying about it. I

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Speaker 1: think the market should be more worried, thinking, oh, we've

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Speaker 1: seen this movie before, but they're not putting the pieces together.

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Speaker 1: The risks are higher this time around. That's my colleague

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Speaker 1: Liz McCormick. She's Bloomberg's chief correspondent for Global macro markets,

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Speaker 1: and she says the widespread assumption that all will be

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Speaker 1: fine in the end means politicians in Washington aren't feeling

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Speaker 1: the pressure to act like they did in past showdowns.

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Speaker 1: Liz and Bloomberg congressional correspondent Eric Wasson have been closely

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Speaker 1: following this story, and they're here with me now to

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Speaker 1: explain why this lack of urgency about the debt limit

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Speaker 1: could have the opposite effect and possibly raise the likelihood

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Speaker 1: of a default. Liz, we're talking about how disastrous it

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Speaker 1: would be if the US to fall sign its debt.

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Speaker 1: Before we get into the details, can you just tell

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Speaker 1: us what is the US debt, how big is it

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Speaker 1: and who does the US owe it too? Well, the

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Speaker 1: US debt is over thirty trillion, and the US owes

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Speaker 1: it to a lot of people. You know, we have

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Speaker 1: big foreign borrowers that help fund our deficit, like China

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Speaker 1: and Japan. We do have a large swath of domestic

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Speaker 1: buyers institutions, you know, the big mutual funds, the asset managers.

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Speaker 1: They buy a lot of treasuries. Of course, mom and

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Speaker 1: pop can go to treasury direction buy some treasuries. But

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Speaker 1: we have a lot of foreign nations and big investors

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Speaker 1: are the largest buyers of our debt. The majority of

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Speaker 1: the debt the US issues is at auctions as we

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Speaker 1: call it. They have you know, set regular predictable auctions

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Speaker 1: of their different maturities of debt, bills, the shortest notes

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Speaker 1: and bonds. So they go into the marketplace and they issue.

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Speaker 1: Majority of this is bought by the private sector. The

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Speaker 1: Fed of course, you know, through the years through their

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Speaker 1: quantitaties and helps buy some debt, but most of treasuries

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Speaker 1: are done at auction for these big institutional buyers, foreign

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Speaker 1: central banks. That is the primary means that they are

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Speaker 1: borrowing to fund the deficit. And eric, just as long

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Speaker 1: as we're defining our terms from the start, the debt

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Speaker 1: is different from the national deficit. Yeah. Deficits are the

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Speaker 1: annual shortfall between revenue and spending. For two decades, we've

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Speaker 1: basically spent more than we've taken in. That's been exacerbated

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Speaker 1: by both tax cuts and spending, especially during the recent pandemic.

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Speaker 1: And so what happens is each year the government spends

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Speaker 1: more than it takes in in tax revenue, and so

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Speaker 1: that shortfall gets piled onto the national debt in year

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Speaker 1: after year it grows with interest and everything else. And

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Speaker 1: so now we're north of thirty trillion dollars in debt. Yeah,

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Speaker 1: the US hit it's thirty one point four trillion dollar

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Speaker 1: debt ceiling in mid January, and ever since then, Treasurary

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Speaker 1: Secretary Yellen is used so called extraordinary measures to prevent

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Speaker 1: a payment default. These are basically stopping payments on intergovernmental

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Speaker 1: transfers his accounting moves that essentially allow them to continue

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Speaker 1: paying all the outside obligations, but at some point they

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Speaker 1: will run out. Yellen told Congress it would be sometime

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Speaker 1: after early June would be the date when that comes

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Speaker 1: into effect, and the Congressional Budget Office, the nonpartisan scorekeeper

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Speaker 1: for Congress, has said it could come sometime in the

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Speaker 1: summer or fall. And one way that the US could

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Speaker 1: avoid defaulting is if they simply borrowed more money, but

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Speaker 1: they can't do that because of the debt ceiling. And

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Speaker 1: this is an artificial cap put on lending that the

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Speaker 1: Congress enforces so that the US can't just keep spending

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Speaker 1: and spending. How actually does that work? Well, The point

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Speaker 1: of thing about the dead ceiling is it's about paying

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Speaker 1: for spending that's already been authorized, obligations that have been

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Speaker 1: incurred already through spending bills, through laws, whether it's the

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Speaker 1: Social Security Act which has been around for decades, or

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Speaker 1: medicare that they're just on autopilot. A hundred years ago,

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Speaker 1: the debt sailing was actually instituted, and it regularly gets

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Speaker 1: run up against the issue is that, and we saw

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Speaker 1: in twenty eleven was the most prominent of this, is

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Speaker 1: that the opportunities used by politicians to try to have

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Speaker 1: a debate about future government spending. And that's what we're

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Speaker 1: running into now. Republicans have asked for deep spending cuts

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Speaker 1: to be agreed to in order to get their vote

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Speaker 1: to raise the debt sailing, and because they control the

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Speaker 1: House representatives, their opinion on this matters greatly. And what

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Speaker 1: has come into play a lot of times is that

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Speaker 1: Treasury officials through the years, and even the many at

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Speaker 1: the rating agencies have said, this is making Treasury having

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Speaker 1: to finagle and wrangle for what Eric just said, spending

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Speaker 1: that's already been approved. They're not coming up with new spending.

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Speaker 1: So the whole thing creates a problem. You know, Treasury

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Speaker 1: just wants to fund what's already been approved. But because

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Speaker 1: of Eric was saying, the long history of creating this

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Speaker 1: debt ceiling, the government has to lift it or resuspend it,

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Speaker 1: which they've done many times, and The really important point here,

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Speaker 1: I suppose, is that when the US issues debt, it's

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Speaker 1: the full faith in credit of the United States saying

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Speaker 1: we're good for it, we're going to pay it back.

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Speaker 1: And never in its history has the US defaulted, So

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Speaker 1: if it does, it would have enormous shocks to markets

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Speaker 1: around the world, right exactly. I mean, treasuries are seen

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Speaker 1: as the global risk free security. The question is if

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Speaker 1: the US were to default and you lose that kind

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Speaker 1: of confidence, it's a long road to get it back right,

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Speaker 1: and that's the risk. We saw in twenty eleven that

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Speaker 1: one of the rating agencies even did downgrade from triple

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Speaker 1: A US debt, even though back then treasury yields actually

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Speaker 1: went down. But there's a different environment, and people have

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Speaker 1: warned that you can't kind of expect everything to happen

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Speaker 1: the same. Some have said expect the unexpected. You know,

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Speaker 1: there's other securities available globally that are more appealing. So

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Speaker 1: I think that is the big risk that if there

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Speaker 1: was a default, it could be catastrophic, hurt the economy

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Speaker 1: at a time where we don't need this, and risk

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Speaker 1: you losing the safe haven status of treasuries, which is

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Speaker 1: what helps the government fund itself at the least cost possible.

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Speaker 1: One thing I think we shall also talk about is

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Speaker 1: that while default is one thing, coming up even to

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Speaker 1: the brink, as we did in twenty eleven also has effects.

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Speaker 1: We saw a large equity market drop at that time.

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Speaker 1: We did see the downgrade from standard and Poor's first

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Speaker 1: ever downrade from the Sterling triple A rating of the

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Speaker 1: US at that time, and those do have costs. And

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Speaker 1: I think what I'm hearing from Capitol Hill is that

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Speaker 1: we're going to go up against the brink again. It's

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Speaker 1: going to look very similar to twenty eleven or even

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Speaker 1: more dicey. So even if the payment default is ultimately avoided,

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Speaker 1: going up to the brink does have consequences on financial markets.

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Speaker 1: Our conversation continues after the break. Eric. Before the break,

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Speaker 1: you were talking about what happened in twenty eleven, which

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Speaker 1: is when we had the last really big showdown over

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Speaker 1: the debt ceiling. Can you remind us what happened there?

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Speaker 1: You know, in some ways it was very similar to

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Speaker 1: the current situation. We had a democratic president, President Barack Obama,

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Speaker 1: and a Republican House. The newly empowered Republican House had

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Speaker 1: come to power on a wave of Tea Party activism

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Speaker 1: about federal spending. And at that time President Obama had

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Speaker 1: already empowered a Deficit Commission and was entertaining ideas about

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Speaker 1: reducing deficits. And he entered into negotiations with the new

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Speaker 1: House Republican majority led by a Speaker John Bayner, and ultimately,

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Speaker 1: after lots of wrangling, coming right up against a deadline,

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Speaker 1: they came to an agreement and this set into place

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Speaker 1: budget caps on annual government spending. A set empowered a

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Speaker 1: future super committee, so called to come up with longer

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Speaker 1: term budget cuts. Super committee ultimately did fail, and many

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Speaker 1: of the budget caps were later overridden by future Congresses. However,

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Speaker 1: there was ultimately a trajectory bent on spending. By one estimate,

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Speaker 1: one million US jobs were lost because of less government spending,

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Speaker 1: at least that's the liberal point of view. So this

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Speaker 1: deal was struck. The problem we have now is that

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Speaker 1: that deal is hated by both parties. You would think,

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Speaker 1: if it was a great solution, we could just reach

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Speaker 1: into the briefcase and pull that out and do it again.

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Speaker 1: The reason we can't is because Democrats felt it was

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Speaker 1: too costly that the Great Recession that started in two

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Speaker 1: eight two thousand and nine was prolonged because of that deal,

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Speaker 1: and Republicans felt it was too easy in later years

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Speaker 1: to override that. It didn't put into permanent law these

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Speaker 1: spending cuts, and they didn't get a lot of bang

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Speaker 1: for their buck. So neither side wants to go back

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Speaker 1: to that deal. We want to remember now the markets

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Speaker 1: are kind of on tenderhooks for other reasons. Right We've

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Speaker 1: had the most aggressive federal reserve tightening in decades. Inflation

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Speaker 1: and is still a problem. Last year was a horrific

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Speaker 1: for investors, both in their four O one case, stocks

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Speaker 1: and bonds did terrible. We don't need another dilemma of

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Speaker 1: this debt ceiling getting down to the wire, risks of

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Speaker 1: them not getting it in time, Like Eric said, even

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Speaker 1: if they get a deal in the final hours, it

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Speaker 1: can create a lot of volatility in the markets, and

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Speaker 1: the markets don't need it. The Chairman of the Federal

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Speaker 1: Reserved Jerome Powell, has also warned that a default on

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Speaker 1: the debt would do a lot of damage to the

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Speaker 1: US economy. What is he saying? Chairman Powell has several

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Speaker 1: times talked about how important it is full stop that

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Speaker 1: they just need to raise the debt ceiling, and to

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Speaker 1: not think the FED can just rush in and cure

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Speaker 1: any ills that happen if there was a default. Just

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Speaker 1: that Congress raising the death ceiling is really the only alternative.

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Speaker 1: There are no rabbits and hats to be pulled out

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Speaker 1: on this. It creates issue for the Fed as well.

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Speaker 1: They're trying to bring inflation under control. There's just so

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Speaker 1: many risks in the marketplace now that adding this to

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Speaker 1: it is kind of the last thing people need. Eric

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Speaker 1: and Liz, you report in a new story that you've

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Speaker 1: written about this topic that there is this kind of

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Speaker 1: feeling of fatigue, a little bit of cynicism, that we've

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Speaker 1: been down this road before. Just what you were saying, Eric,

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Speaker 1: that in twenty eleven we came to the brink but

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Speaker 1: pulled back, and we're gonna pull back again because no

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Speaker 1: one is going to allow the US to default. Certainly,

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Speaker 1: that's the prevailing feeling here in Washington. When you talk

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Speaker 1: to people and Liz on Wall Street, there seems to

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Speaker 1: be a feeling like they're gonna solve the problem. It's

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Speaker 1: all a bunch of drama. But that's kind of a

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Speaker 1: dangerous thing. You found out. Yeah. I think that's the thing.

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Speaker 1: It's like you could do a psychological analysis and say,

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Speaker 1: like when you're not worrying about something, or you kind

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Speaker 1: of put it off that can't happen, that's when you

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Speaker 1: really have to worry about it. And I think to

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Speaker 1: the credit of traitors, they're keeping up with as much

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Speaker 1: as they can. So you want to say, we've seen

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Speaker 1: this death ceiling movie before. We know it's going to

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Speaker 1: be messy and ugly. They'll work it out. I just

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Speaker 1: got too much to worry about it. I got the FED,

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Speaker 1: I got inflation, my trades are underwater, or whatever it be.

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Speaker 1: But I think we've had several people like you mentioned

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Speaker 1: in our story saying that's when you have to worry. Eric.

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Speaker 1: How concerned should Wall Street be? And I guess everyone

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Speaker 1: else looking to avoid a default about this group of

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Speaker 1: hard right members in the House. They're the ones who

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Speaker 1: tried to block McCarthy from becoming speaker, and they've indicated

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Speaker 1: they're willing to test the limits on the debt. I

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Speaker 1: think Wall Street should be concerned, and I think that

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Speaker 1: was really driven home by the election of Speaker McCarthy.

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Speaker 1: It took fourteen ballots for Speaker McCarthy to become the speaker,

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Speaker 1: he had to do a lot of deals with the

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Speaker 1: hard right conservatives in his conference to get that. This

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Speaker 1: was a real surprise, and I think that the debt

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Speaker 1: ceiling situation is going to look very similar. In making

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Speaker 1: this deal, he basically gave veto power over his own

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Speaker 1: speakership to just a handful of members. Because the margins

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Speaker 1: are so close in the House a four seat majority,

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Speaker 1: he can basically be ousted potentially by just those four

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Speaker 1: or five members of his conference. Who would you know

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Speaker 1: if they're angered by any concessions he makes on the

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Speaker 1: death ceiling. Maybe people aren't processing, like Eric saying, I

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Speaker 1: think the market should be more worried, thinking, oh, we've

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Speaker 1: seen this movie before and they know the speaker vote

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Speaker 1: was such a mess, but they're not putting the pieces together.

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Speaker 1: That that means McCarthy is up more against a wall

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Speaker 1: and that the risks are higher this time around. And

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Speaker 1: it's also coming from the other side. Biden. You know

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Speaker 1: he said he won't negotiate. Now he's tried to do

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Speaker 1: this docy dough. I would call it of a parallel

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Speaker 1: negotiation with McCarthy on budget, but it can't be connected

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Speaker 1: to a clean debt ceiling increase. You know, we could

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Speaker 1: see that go different ways. Perhaps they come to an agreement.

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Speaker 1: That's enough of a face saving agreement from McCarthy, I

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Speaker 1: can see where we can find common ground. There's nothing

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Speaker 1: in there but me walking away. That does not believe

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Speaker 1: at the end of the day we can come to

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Speaker 1: an agreement. Can you tell us what does that clean?

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Speaker 1: Just a bill that just says the debt ceiling will

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Speaker 1: be raised by x amount or the debt ceiling will

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Speaker 1: be suspended until a certain time, without any other things

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Speaker 1: in that bill, like budget caps, like cuts to Medicare

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Speaker 1: social Security, which some people have raised. Recently, talked to

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Speaker 1: Brendan Boyle, the top Democrat on the House budget committees,

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Speaker 1: that we're going to the mat. This is going to

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Speaker 1: go to the brink because we are not going to

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Speaker 1: give in. And the only way this ends is McCarthy folds.

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Speaker 1: Kevin McCarthy has to put the bill on the floor

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Speaker 1: to allow a clean increase in the debt ceiling period.

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Speaker 1: The Republican argument is Congress doesn't act unless there's deadlines,

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Speaker 1: and the debt ceiling affords an opportunity to talk about

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Speaker 1: long term fiscal health of the US, so the Congress

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Speaker 1: won't actually get around to addressing the fact that under

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Speaker 1: the Congressional Budget Office, we're looking at fifty trillion dollars

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Speaker 1: in debt and after another ten years, but that this

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Speaker 1: trajectory is unsustainable. At some point we're going to be

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Speaker 1: in the area of developing country where our debt cannot

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Speaker 1: attracting buyers anymore. And this opportunity that the debt selling

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Speaker 1: affords to talk about long term spending trajectory, maybe revenue

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Speaker 1: as well, is why we should do this. So, you know,

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Speaker 1: I think sometimes people on the left in the White

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Speaker 1: House say this is a cynical opportunity that Republicans are taking.

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Speaker 1: But I think there are true believers who say, look,

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Speaker 1: the debt is not sustainable, and this is an opportunity

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Speaker 1: to have this conversation when we come back. Is there

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Speaker 1: a way out of this mess? I guess one solution

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Speaker 1: while all this fighting is going on, if they do

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Speaker 1: go past the deadline and they don't have a solution,

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Speaker 1: one idea that Republicans are putting forward is to selectively

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Speaker 1: pay off parts of the debt. Is that a real possibility? Well,

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Speaker 1: there are different proposals to prioritize the US bondholders and

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Speaker 1: beneficiaries of Social Security of others. But Janet Yellen and

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Speaker 1: others have pressed back against this idea of debt prioritization,

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Speaker 1: and outside experts like the Biparson Policy Center, which is

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Speaker 1: a real leader on the debt ceiling issue and often

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Speaker 1: issues its own estimates of when extraordinary measures will run out.

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Speaker 1: I've said, prioritization is just not really likely possible. It's

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Speaker 1: too chaotic the payments that are coming in on a

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Speaker 1: regular basis to really handle the deluge in the absence

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Speaker 1: of the liquidity that allowing the US to borrow provides.

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Speaker 1: So we have Republicans pressuring the White House pretty heavily

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Speaker 1: for spending cons in order to pay for some of

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Speaker 1: the debt. And what is the White House's response. Biden,

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Speaker 1: you know, really is not motivated to repeat the example

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Speaker 1: of President Obama to engage in what was called a

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Speaker 1: grand bargain. He is putting forth budget proposals to raise taxes,

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Speaker 1: you know, two trillion dollars in deficit reduction over ten years.

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Speaker 1: There's a billionaire surtax in his proposals, stock buyback increases,

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Speaker 1: you know, the idea of a funding medicare by taxing

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Speaker 1: those who make over four hundred thousand dollars a year

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Speaker 1: more heavily. These are non starters with the Republicans, so

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Speaker 1: the two sides are very far apart. One thing I

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Speaker 1: think we should bring up is that even like Eric

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Speaker 1: has said, this could go down to the wire and

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Speaker 1: there would be consequences even if there's not default. The

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Speaker 1: Government Accountability Office has done several good studies on these

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Speaker 1: past episodes, and what tends to happen is people will

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Speaker 1: avoid buying certain death that is, let's say, at risk

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Speaker 1: treasury bills that mature around the time they're worried the

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Speaker 1: treasury would run out of money, and that means interest

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Speaker 1: rates go up, and the Government Accountability Office has showed

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Speaker 1: that this has costs the government money. Interest costs have

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Speaker 1: gone up, and you know, we're a point with interest

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Speaker 1: costs are a huge deal. With the Fed interest rates

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Speaker 1: going up so much, interest costs, which had been a

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Speaker 1: problem for a long time, have gone even higher. The

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Speaker 1: CBO reports show the trajectory of or sixpence is troublesome already.

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Speaker 1: There is a lot of consequences that you know, even

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Speaker 1: the US taxpayers will ultimately pay for this if this,

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Speaker 1: you know, is just a drawn out battle to the

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Speaker 1: bitter end. So Eric, do we get a deal in

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Speaker 1: the end? The situation looks a little bit bleak. The

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Speaker 1: Republicans are pushing for cuts. Biden is saying no, McCarthy

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Speaker 1: doesn't have a lot of power against people who might

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Speaker 1: be willing to go much further than Republicans have gone

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Speaker 1: in the past. How do they get themselves out of this?

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Speaker 1: You know, I don't have a clear answer to that,

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Speaker 1: but there are signs they could get a deal. I

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Speaker 1: interviewed Jody Arrington, the top Budget Committee Republican, and I

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Speaker 1: asked him, do you need ten year balanced budgets? You

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Speaker 1: need these trillions of dollars in cuts? He doesn't think so.

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Speaker 1: He is someone who said we can go for a

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Speaker 1: compromise deal. One thing they've put on the table is

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Speaker 1: one hundred and fifty billion dollars in cuts just to

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Speaker 1: the agency budgets for the spending bill that's due in October.

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Speaker 1: That's a size cut that's too large for Democrats, especially

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Speaker 1: if you shield defense. This would cut everything from National

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Speaker 1: Park Service to cancer research. But maybe there's a middle number.

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Speaker 1: Once you're just talking about a budget cap number. You

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Speaker 1: know there could be some back and forth there. In

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Speaker 1: the past, we've seen figures like Senate Republican leader Mitch

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Speaker 1: McConnell kind of wag his finger and say we are

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Speaker 1: not going to default on the debt and everybody is

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Speaker 1: snapped to attention. Does he have that sort of influence

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Speaker 1: now the way he did in twenty eleven. The Senate

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Speaker 1: is remarkably sidelined in all of this for several reasons,

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Speaker 1: one of which is that McConnell has just said he's

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Speaker 1: basically deferring to McCarthy. He's going to support McCarthy as

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Speaker 1: the lead person on this and negotiating with Biden, well,

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Speaker 1: I think it's entirely reasonable for the news speaker in

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Speaker 1: his team to put spending reduction on the table. I

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Speaker 1: wish him well and talking to the president that's where

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Speaker 1: a solution lies. Mitch McConnell and Joe Biden are old friends. Actually,

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Speaker 1: McConnell went to Biden's son's funeral. They have a personal relationship,

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Speaker 1: and they cut deals. Before they cut a deal to

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Speaker 1: ward off a fiscal cliff on taxes in twenty thirteen,

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Speaker 1: they did have a role in the twenty eleven deal

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Speaker 1: finding out how to finagle the budget cap and its

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Speaker 1: definitions at the very last minute in saving the deal

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Speaker 1: that Bayner and Obama were working on. So the fact

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Speaker 1: that McConnell is sidelined, I think is very important here.

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Speaker 1: He is also being challenged from members within his caucus,

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Speaker 1: most notably Rick Scott. Rick Scott tried to run for

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Speaker 1: majority leader. This is the Republican from Florida who put

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Speaker 1: Medicare and so security cuts on the table. He has

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Speaker 1: since walked that back. So you know, this is someone

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Speaker 1: who's under pressure and sidelined at the moment. Liz Bloomberg

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Speaker 1: pulled financial professionals and in their opinion, there's less than

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Speaker 1: a ten percent chance that the US will default. Are

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Speaker 1: they right? Do you think Congress will reach a deal

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Speaker 1: in the end? I agree with Eric that there's a

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Speaker 1: lot of risks. I would hope the cooler heads prevail

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Speaker 1: and ultimately know that the detrimental and long lasting effects

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Speaker 1: of a default are just immeasurable that you just can't

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Speaker 1: risk that. So I do. Maybe it's a little bit

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Speaker 1: of hope, but I think something will come. I don't

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Speaker 1: know if it's going to come without some dire cost beforehand.

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Speaker 1: But like I said, you would hope that cooler heads prevail,

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Speaker 1: and there's an understanding that an actual default on the

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Speaker 1: US Treasury debt would be catastrophic. Well, the proof will

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Speaker 1: be upcoming. Steps that listeners should pay attention to is

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Speaker 1: the House Republicans are going to develop their own budget

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Speaker 1: in response to the Biden budget. What does that look like?

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Speaker 1: Do they all unify behind that? If there's a unified position,

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Speaker 1: that sets off potentially real negotiations with Biden and McCarthy.

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Speaker 1: If they can't unify, if they look like they're in disarray,

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Speaker 1: I actually think this will drag out longer because Democrats

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Speaker 1: will feel like they have the upper hand there. You know,

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Speaker 1: there's going to be several months of wrangling over this,

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Speaker 1: and it really depends on what Republicans, when they come

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Speaker 1: down to it, put forward as their next offer. I

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Speaker 1: think Wall Street is going to get more religion on

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Speaker 1: the concern as the months go on. I think what's

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Speaker 1: making it harder for them Eric too, is they're not sure.

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Speaker 1: This is how traders work. Where to gauge you know,

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Speaker 1: what do I avoid? You know, like which exact bills

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Speaker 1: should I not buy. And I don't mean this flippantly,

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Speaker 1: but Wall Street has a lot on their plate. They're maneuvering.

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Speaker 1: You know, China's reopening, is that adding to inflation. There's

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Speaker 1: so many things that the dead ceiling. They're concerned, but

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Speaker 1: they need to have it be more crystal clear. Once

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Speaker 1: we get through maybe tax season and Janet yelling can

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Speaker 1: be more clear on the cash flows. And when they're

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Speaker 1: going to hit that wall, then I think you're going

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Speaker 1: to see and mass people avoiding any treasury bills or

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Speaker 1: notes and bonds that have interest payments. Around that time,

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Speaker 1: I think they're going to get more concerned. It's just,

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Speaker 1: you know, among all the things, they can't quantify it

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Speaker 1: enough to price it and trade it. I think markets

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Speaker 1: have a very important role to play here. And this

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Speaker 1: is why we make up to the brink is because

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Speaker 1: only when markets start to react, when the public start

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Speaker 1: to react, and the deadline becomes clear, that Congress then acts. Congress.

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Speaker 1: You know, I've covered it for more than a decade

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Speaker 1: and they always act like a college student with a

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Speaker 1: term paper. They don't finish it until the actual deadline,

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Speaker 1: and the markets will make that deadline for them. Liz McCormack,

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Speaker 1: Eric Wasson, thanks so much for coming on the show,

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Speaker 1: Thanks for having us, Thank you, thanks for listening to

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Speaker 1: us here at The Big Take. It's a daily podcast

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00:25:26,800 --> 00:25:30,399
Speaker 1: from Bloomberg and iHeartRadio. For more shows from my Heart Radio,

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Speaker 1: visit the iHeartRadio app, Apple Podcast, or wherever you listen,

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Speaker 1: and we'd love to hear from you. Email us questions

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Speaker 1: or comments to Big Take at Bloomberg dot net. The

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Speaker 1: supervising producer of The Big Take is Vicky Bergolino. Our

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Speaker 1: senior producer is Katherine Fink. Our producers are Moe barrow

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Speaker 1: At Michael Fallero. Hilde Garcia is our engineer. Our original

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Speaker 1: music was composed by Leo Sidrin. I'm west Kasova. We'll

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Speaker 1: be back to Borrow with another Big Take. H