Speaker 1: From Bloomberg News and iHeartRadio. It's the big take. I'm
Speaker 1: west Kasova today the fight to stop a US debt default.
Speaker 1: If you've been following all the news lately about Republicans
Speaker 1: and Democrats arguing over raising the thirty one point for
Speaker 1: trillion dollars US debt limit, you might be saying to yourself,
Speaker 1: just wake me when it's over. And frankly, you'd be
Speaker 1: forgiven for thinking that, because we have been here before.
Speaker 1: In twenty eleven, just like now, Republicans and congress were
Speaker 1: demanding big spending cuts from a Democratic president, Barack Obama
Speaker 1: in exchange for voting to increase the limit and avoid
Speaker 1: a debt default. Right now, the House of Represented is
Speaker 1: still trying to pass a bill that a majority of
Speaker 1: Republicans and Democrats in the Senate have already said they
Speaker 1: won't vote for, holding our economy captive to Washington politics
Speaker 1: once again. What's clear now is that any solution to
Speaker 1: avoid default must be bipartisan, and in the end, under
Speaker 1: enormous pressure from the public and Wall Street to take action,
Speaker 1: they reached a deal at the very last minute. Senate
Speaker 1: Democrats and Republicans say they've struck a deal to avoid
Speaker 1: a looming economic disaster. The agreement will temporarily raise the
Speaker 1: debt ceiling through early December. Variations of this same script
Speaker 1: have played out again and again since then, and in
Speaker 1: each case a deal was struck in the nick of
Speaker 1: time to prevent the unthinkable, the US not making good
Speaker 1: on its debts and all the global economic mayhem that
Speaker 1: would result. If the US doesn't raise the borrowing limit
Speaker 1: and defaults on its debt for the first time in history,
Speaker 1: it could have devastating consequences for the economy, including a
Speaker 1: possible recession and a lot of people thrown out of work,
Speaker 1: and it would shake the world's faith in US treasuries
Speaker 1: as safe and reliable. This time, Republicans in the House,
Speaker 1: led by Speaker Kevin McCarthy and urged on by a
Speaker 1: group of hard right members who say they'll risk a
Speaker 1: debt default, are once again refusing to budge unless President
Speaker 1: Joe Biden agrees to spending cuts. I don't know if
Speaker 1: you have any children, but if you hadn't a child,
Speaker 1: and you gave him a credit card and they kept
Speaker 1: raising it and they hit the limit, so you just
Speaker 1: raised it again, clean increase and again and again, would
Speaker 1: you just keep doing that, or would you change the behavior?
Speaker 1: Why wouldn't we sit down now and change this behavior.
Speaker 1: Biden says he won't cave to their demands, and the
Speaker 1: very notion that we would default on the safest, most
Speaker 1: respected debt in the world is mind boggling. I'm not
Speaker 1: going to get into their reckless threats to take the
Speaker 1: economy hostage. I won't let that happen. And yet the
Speaker 1: general action and much of Washington in the financial world
Speaker 1: this time around, has been kind of a collective shrug.
Speaker 1: Many people just seem to assume Biden and McCarthy will
Speaker 1: ultimately pull back from the brink, so there's no need
Speaker 1: to get tied up in knots worrying about it. I
Speaker 1: think the market should be more worried, thinking, oh, we've
Speaker 1: seen this movie before, but they're not putting the pieces together.
Speaker 1: The risks are higher this time around. That's my colleague
Speaker 1: Liz McCormick. She's Bloomberg's chief correspondent for Global macro markets,
Speaker 1: and she says the widespread assumption that all will be
Speaker 1: fine in the end means politicians in Washington aren't feeling
Speaker 1: the pressure to act like they did in past showdowns.
Speaker 1: Liz and Bloomberg congressional correspondent Eric Wasson have been closely
Speaker 1: following this story, and they're here with me now to
Speaker 1: explain why this lack of urgency about the debt limit
Speaker 1: could have the opposite effect and possibly raise the likelihood
Speaker 1: of a default. Liz, we're talking about how disastrous it
Speaker 1: would be if the US to fall sign its debt.
Speaker 1: Before we get into the details, can you just tell
Speaker 1: us what is the US debt, how big is it
Speaker 1: and who does the US owe it too? Well, the
Speaker 1: US debt is over thirty trillion, and the US owes
Speaker 1: it to a lot of people. You know, we have
Speaker 1: big foreign borrowers that help fund our deficit, like China
Speaker 1: and Japan. We do have a large swath of domestic
Speaker 1: buyers institutions, you know, the big mutual funds, the asset managers.
Speaker 1: They buy a lot of treasuries. Of course, mom and
Speaker 1: pop can go to treasury direction buy some treasuries. But
Speaker 1: we have a lot of foreign nations and big investors
Speaker 1: are the largest buyers of our debt. The majority of
Speaker 1: the debt the US issues is at auctions as we
Speaker 1: call it. They have you know, set regular predictable auctions
Speaker 1: of their different maturities of debt, bills, the shortest notes
Speaker 1: and bonds. So they go into the marketplace and they issue.
Speaker 1: Majority of this is bought by the private sector. The
Speaker 1: Fed of course, you know, through the years through their
Speaker 1: quantitaties and helps buy some debt, but most of treasuries
Speaker 1: are done at auction for these big institutional buyers, foreign
Speaker 1: central banks. That is the primary means that they are
Speaker 1: borrowing to fund the deficit. And eric, just as long
Speaker 1: as we're defining our terms from the start, the debt
Speaker 1: is different from the national deficit. Yeah. Deficits are the
Speaker 1: annual shortfall between revenue and spending. For two decades, we've
Speaker 1: basically spent more than we've taken in. That's been exacerbated
Speaker 1: by both tax cuts and spending, especially during the recent pandemic.
Speaker 1: And so what happens is each year the government spends
Speaker 1: more than it takes in in tax revenue, and so
Speaker 1: that shortfall gets piled onto the national debt in year
Speaker 1: after year it grows with interest and everything else. And
Speaker 1: so now we're north of thirty trillion dollars in debt. Yeah,
Speaker 1: the US hit it's thirty one point four trillion dollar
Speaker 1: debt ceiling in mid January, and ever since then, Treasurary
Speaker 1: Secretary Yellen is used so called extraordinary measures to prevent
Speaker 1: a payment default. These are basically stopping payments on intergovernmental
Speaker 1: transfers his accounting moves that essentially allow them to continue
Speaker 1: paying all the outside obligations, but at some point they
Speaker 1: will run out. Yellen told Congress it would be sometime
Speaker 1: after early June would be the date when that comes
Speaker 1: into effect, and the Congressional Budget Office, the nonpartisan scorekeeper
Speaker 1: for Congress, has said it could come sometime in the
Speaker 1: summer or fall. And one way that the US could
Speaker 1: avoid defaulting is if they simply borrowed more money, but
Speaker 1: they can't do that because of the debt ceiling. And
Speaker 1: this is an artificial cap put on lending that the
Speaker 1: Congress enforces so that the US can't just keep spending
Speaker 1: and spending. How actually does that work? Well, The point
Speaker 1: of thing about the dead ceiling is it's about paying
Speaker 1: for spending that's already been authorized, obligations that have been
Speaker 1: incurred already through spending bills, through laws, whether it's the
Speaker 1: Social Security Act which has been around for decades, or
Speaker 1: medicare that they're just on autopilot. A hundred years ago,
Speaker 1: the debt sailing was actually instituted, and it regularly gets
Speaker 1: run up against the issue is that, and we saw
Speaker 1: in twenty eleven was the most prominent of this, is
Speaker 1: that the opportunities used by politicians to try to have
Speaker 1: a debate about future government spending. And that's what we're
Speaker 1: running into now. Republicans have asked for deep spending cuts
Speaker 1: to be agreed to in order to get their vote
Speaker 1: to raise the debt sailing, and because they control the
Speaker 1: House representatives, their opinion on this matters greatly. And what
Speaker 1: has come into play a lot of times is that
Speaker 1: Treasury officials through the years, and even the many at
Speaker 1: the rating agencies have said, this is making Treasury having
Speaker 1: to finagle and wrangle for what Eric just said, spending
Speaker 1: that's already been approved. They're not coming up with new spending.
Speaker 1: So the whole thing creates a problem. You know, Treasury
Speaker 1: just wants to fund what's already been approved. But because
Speaker 1: of Eric was saying, the long history of creating this
Speaker 1: debt ceiling, the government has to lift it or resuspend it,
Speaker 1: which they've done many times, and The really important point here,
Speaker 1: I suppose, is that when the US issues debt, it's
Speaker 1: the full faith in credit of the United States saying
Speaker 1: we're good for it, we're going to pay it back.
Speaker 1: And never in its history has the US defaulted, So
Speaker 1: if it does, it would have enormous shocks to markets
Speaker 1: around the world, right exactly. I mean, treasuries are seen
Speaker 1: as the global risk free security. The question is if
Speaker 1: the US were to default and you lose that kind
Speaker 1: of confidence, it's a long road to get it back right,
Speaker 1: and that's the risk. We saw in twenty eleven that
Speaker 1: one of the rating agencies even did downgrade from triple
Speaker 1: A US debt, even though back then treasury yields actually
Speaker 1: went down. But there's a different environment, and people have
Speaker 1: warned that you can't kind of expect everything to happen
Speaker 1: the same. Some have said expect the unexpected. You know,
Speaker 1: there's other securities available globally that are more appealing. So
Speaker 1: I think that is the big risk that if there
Speaker 1: was a default, it could be catastrophic, hurt the economy
Speaker 1: at a time where we don't need this, and risk
Speaker 1: you losing the safe haven status of treasuries, which is
Speaker 1: what helps the government fund itself at the least cost possible.
Speaker 1: One thing I think we shall also talk about is
Speaker 1: that while default is one thing, coming up even to
Speaker 1: the brink, as we did in twenty eleven also has effects.
Speaker 1: We saw a large equity market drop at that time.
Speaker 1: We did see the downgrade from standard and Poor's first
Speaker 1: ever downrade from the Sterling triple A rating of the
Speaker 1: US at that time, and those do have costs. And
Speaker 1: I think what I'm hearing from Capitol Hill is that
Speaker 1: we're going to go up against the brink again. It's
Speaker 1: going to look very similar to twenty eleven or even
Speaker 1: more dicey. So even if the payment default is ultimately avoided,
Speaker 1: going up to the brink does have consequences on financial markets.
Speaker 1: Our conversation continues after the break. Eric. Before the break,
Speaker 1: you were talking about what happened in twenty eleven, which
Speaker 1: is when we had the last really big showdown over
Speaker 1: the debt ceiling. Can you remind us what happened there?
Speaker 1: You know, in some ways it was very similar to
Speaker 1: the current situation. We had a democratic president, President Barack Obama,
Speaker 1: and a Republican House. The newly empowered Republican House had
Speaker 1: come to power on a wave of Tea Party activism
Speaker 1: about federal spending. And at that time President Obama had
Speaker 1: already empowered a Deficit Commission and was entertaining ideas about
Speaker 1: reducing deficits. And he entered into negotiations with the new
Speaker 1: House Republican majority led by a Speaker John Bayner, and ultimately,
Speaker 1: after lots of wrangling, coming right up against a deadline,
Speaker 1: they came to an agreement and this set into place
Speaker 1: budget caps on annual government spending. A set empowered a
Speaker 1: future super committee, so called to come up with longer
Speaker 1: term budget cuts. Super committee ultimately did fail, and many
Speaker 1: of the budget caps were later overridden by future Congresses. However,
Speaker 1: there was ultimately a trajectory bent on spending. By one estimate,
Speaker 1: one million US jobs were lost because of less government spending,
Speaker 1: at least that's the liberal point of view. So this
Speaker 1: deal was struck. The problem we have now is that
Speaker 1: that deal is hated by both parties. You would think,
Speaker 1: if it was a great solution, we could just reach
Speaker 1: into the briefcase and pull that out and do it again.
Speaker 1: The reason we can't is because Democrats felt it was
Speaker 1: too costly that the Great Recession that started in two
Speaker 1: eight two thousand and nine was prolonged because of that deal,
Speaker 1: and Republicans felt it was too easy in later years
Speaker 1: to override that. It didn't put into permanent law these
Speaker 1: spending cuts, and they didn't get a lot of bang
Speaker 1: for their buck. So neither side wants to go back
Speaker 1: to that deal. We want to remember now the markets
Speaker 1: are kind of on tenderhooks for other reasons. Right We've
Speaker 1: had the most aggressive federal reserve tightening in decades. Inflation
Speaker 1: and is still a problem. Last year was a horrific
Speaker 1: for investors, both in their four O one case, stocks
Speaker 1: and bonds did terrible. We don't need another dilemma of
Speaker 1: this debt ceiling getting down to the wire, risks of
Speaker 1: them not getting it in time, Like Eric said, even
Speaker 1: if they get a deal in the final hours, it
Speaker 1: can create a lot of volatility in the markets, and
Speaker 1: the markets don't need it. The Chairman of the Federal
Speaker 1: Reserved Jerome Powell, has also warned that a default on
Speaker 1: the debt would do a lot of damage to the
Speaker 1: US economy. What is he saying? Chairman Powell has several
Speaker 1: times talked about how important it is full stop that
Speaker 1: they just need to raise the debt ceiling, and to
Speaker 1: not think the FED can just rush in and cure
Speaker 1: any ills that happen if there was a default. Just
Speaker 1: that Congress raising the death ceiling is really the only alternative.
Speaker 1: There are no rabbits and hats to be pulled out
Speaker 1: on this. It creates issue for the Fed as well.
Speaker 1: They're trying to bring inflation under control. There's just so
Speaker 1: many risks in the marketplace now that adding this to
Speaker 1: it is kind of the last thing people need. Eric
Speaker 1: and Liz, you report in a new story that you've
Speaker 1: written about this topic that there is this kind of
Speaker 1: feeling of fatigue, a little bit of cynicism, that we've
Speaker 1: been down this road before. Just what you were saying, Eric,
Speaker 1: that in twenty eleven we came to the brink but
Speaker 1: pulled back, and we're gonna pull back again because no
Speaker 1: one is going to allow the US to default. Certainly,
Speaker 1: that's the prevailing feeling here in Washington. When you talk
Speaker 1: to people and Liz on Wall Street, there seems to
Speaker 1: be a feeling like they're gonna solve the problem. It's
Speaker 1: all a bunch of drama. But that's kind of a
Speaker 1: dangerous thing. You found out. Yeah. I think that's the thing.
Speaker 1: It's like you could do a psychological analysis and say,
Speaker 1: like when you're not worrying about something, or you kind
Speaker 1: of put it off that can't happen, that's when you
Speaker 1: really have to worry about it. And I think to
Speaker 1: the credit of traitors, they're keeping up with as much
Speaker 1: as they can. So you want to say, we've seen
Speaker 1: this death ceiling movie before. We know it's going to
Speaker 1: be messy and ugly. They'll work it out. I just
Speaker 1: got too much to worry about it. I got the FED,
Speaker 1: I got inflation, my trades are underwater, or whatever it be.
Speaker 1: But I think we've had several people like you mentioned
Speaker 1: in our story saying that's when you have to worry. Eric.
Speaker 1: How concerned should Wall Street be? And I guess everyone
Speaker 1: else looking to avoid a default about this group of
Speaker 1: hard right members in the House. They're the ones who
Speaker 1: tried to block McCarthy from becoming speaker, and they've indicated
Speaker 1: they're willing to test the limits on the debt. I
Speaker 1: think Wall Street should be concerned, and I think that
Speaker 1: was really driven home by the election of Speaker McCarthy.
Speaker 1: It took fourteen ballots for Speaker McCarthy to become the speaker,
Speaker 1: he had to do a lot of deals with the
Speaker 1: hard right conservatives in his conference to get that. This
Speaker 1: was a real surprise, and I think that the debt
Speaker 1: ceiling situation is going to look very similar. In making
Speaker 1: this deal, he basically gave veto power over his own
Speaker 1: speakership to just a handful of members. Because the margins
Speaker 1: are so close in the House a four seat majority,
Speaker 1: he can basically be ousted potentially by just those four
Speaker 1: or five members of his conference. Who would you know
Speaker 1: if they're angered by any concessions he makes on the
Speaker 1: death ceiling. Maybe people aren't processing, like Eric saying, I
Speaker 1: think the market should be more worried, thinking, oh, we've
Speaker 1: seen this movie before and they know the speaker vote
Speaker 1: was such a mess, but they're not putting the pieces together.
Speaker 1: That that means McCarthy is up more against a wall
Speaker 1: and that the risks are higher this time around. And
Speaker 1: it's also coming from the other side. Biden. You know
Speaker 1: he said he won't negotiate. Now he's tried to do
Speaker 1: this docy dough. I would call it of a parallel
Speaker 1: negotiation with McCarthy on budget, but it can't be connected
Speaker 1: to a clean debt ceiling increase. You know, we could
Speaker 1: see that go different ways. Perhaps they come to an agreement.
Speaker 1: That's enough of a face saving agreement from McCarthy, I
Speaker 1: can see where we can find common ground. There's nothing
Speaker 1: in there but me walking away. That does not believe
Speaker 1: at the end of the day we can come to
Speaker 1: an agreement. Can you tell us what does that clean?
Speaker 1: Just a bill that just says the debt ceiling will
Speaker 1: be raised by x amount or the debt ceiling will
Speaker 1: be suspended until a certain time, without any other things
Speaker 1: in that bill, like budget caps, like cuts to Medicare
Speaker 1: social Security, which some people have raised. Recently, talked to
Speaker 1: Brendan Boyle, the top Democrat on the House budget committees,
Speaker 1: that we're going to the mat. This is going to
Speaker 1: go to the brink because we are not going to
Speaker 1: give in. And the only way this ends is McCarthy folds.
Speaker 1: Kevin McCarthy has to put the bill on the floor
Speaker 1: to allow a clean increase in the debt ceiling period.
Speaker 1: The Republican argument is Congress doesn't act unless there's deadlines,
Speaker 1: and the debt ceiling affords an opportunity to talk about
Speaker 1: long term fiscal health of the US, so the Congress
Speaker 1: won't actually get around to addressing the fact that under
Speaker 1: the Congressional Budget Office, we're looking at fifty trillion dollars
Speaker 1: in debt and after another ten years, but that this
Speaker 1: trajectory is unsustainable. At some point we're going to be
Speaker 1: in the area of developing country where our debt cannot
Speaker 1: attracting buyers anymore. And this opportunity that the debt selling
Speaker 1: affords to talk about long term spending trajectory, maybe revenue
Speaker 1: as well, is why we should do this. So, you know,
Speaker 1: I think sometimes people on the left in the White
Speaker 1: House say this is a cynical opportunity that Republicans are taking.
Speaker 1: But I think there are true believers who say, look,
Speaker 1: the debt is not sustainable, and this is an opportunity
Speaker 1: to have this conversation when we come back. Is there
Speaker 1: a way out of this mess? I guess one solution
Speaker 1: while all this fighting is going on, if they do
Speaker 1: go past the deadline and they don't have a solution,
Speaker 1: one idea that Republicans are putting forward is to selectively
Speaker 1: pay off parts of the debt. Is that a real possibility? Well,
Speaker 1: there are different proposals to prioritize the US bondholders and
Speaker 1: beneficiaries of Social Security of others. But Janet Yellen and
Speaker 1: others have pressed back against this idea of debt prioritization,
Speaker 1: and outside experts like the Biparson Policy Center, which is
Speaker 1: a real leader on the debt ceiling issue and often
Speaker 1: issues its own estimates of when extraordinary measures will run out.
Speaker 1: I've said, prioritization is just not really likely possible. It's
Speaker 1: too chaotic the payments that are coming in on a
Speaker 1: regular basis to really handle the deluge in the absence
Speaker 1: of the liquidity that allowing the US to borrow provides.
Speaker 1: So we have Republicans pressuring the White House pretty heavily
Speaker 1: for spending cons in order to pay for some of
Speaker 1: the debt. And what is the White House's response. Biden,
Speaker 1: you know, really is not motivated to repeat the example
Speaker 1: of President Obama to engage in what was called a
Speaker 1: grand bargain. He is putting forth budget proposals to raise taxes,
Speaker 1: you know, two trillion dollars in deficit reduction over ten years.
Speaker 1: There's a billionaire surtax in his proposals, stock buyback increases,
Speaker 1: you know, the idea of a funding medicare by taxing
Speaker 1: those who make over four hundred thousand dollars a year
Speaker 1: more heavily. These are non starters with the Republicans, so
Speaker 1: the two sides are very far apart. One thing I
Speaker 1: think we should bring up is that even like Eric
Speaker 1: has said, this could go down to the wire and
Speaker 1: there would be consequences even if there's not default. The
Speaker 1: Government Accountability Office has done several good studies on these
Speaker 1: past episodes, and what tends to happen is people will
Speaker 1: avoid buying certain death that is, let's say, at risk
Speaker 1: treasury bills that mature around the time they're worried the
Speaker 1: treasury would run out of money, and that means interest
Speaker 1: rates go up, and the Government Accountability Office has showed
Speaker 1: that this has costs the government money. Interest costs have
Speaker 1: gone up, and you know, we're a point with interest
Speaker 1: costs are a huge deal. With the Fed interest rates
Speaker 1: going up so much, interest costs, which had been a
Speaker 1: problem for a long time, have gone even higher. The
Speaker 1: CBO reports show the trajectory of or sixpence is troublesome already.
Speaker 1: There is a lot of consequences that you know, even
Speaker 1: the US taxpayers will ultimately pay for this if this,
Speaker 1: you know, is just a drawn out battle to the
Speaker 1: bitter end. So Eric, do we get a deal in
Speaker 1: the end? The situation looks a little bit bleak. The
Speaker 1: Republicans are pushing for cuts. Biden is saying no, McCarthy
Speaker 1: doesn't have a lot of power against people who might
Speaker 1: be willing to go much further than Republicans have gone
Speaker 1: in the past. How do they get themselves out of this?
Speaker 1: You know, I don't have a clear answer to that,
Speaker 1: but there are signs they could get a deal. I
Speaker 1: interviewed Jody Arrington, the top Budget Committee Republican, and I
Speaker 1: asked him, do you need ten year balanced budgets? You
Speaker 1: need these trillions of dollars in cuts? He doesn't think so.
Speaker 1: He is someone who said we can go for a
Speaker 1: compromise deal. One thing they've put on the table is
Speaker 1: one hundred and fifty billion dollars in cuts just to
Speaker 1: the agency budgets for the spending bill that's due in October.
Speaker 1: That's a size cut that's too large for Democrats, especially
Speaker 1: if you shield defense. This would cut everything from National
Speaker 1: Park Service to cancer research. But maybe there's a middle number.
Speaker 1: Once you're just talking about a budget cap number. You
Speaker 1: know there could be some back and forth there. In
Speaker 1: the past, we've seen figures like Senate Republican leader Mitch
Speaker 1: McConnell kind of wag his finger and say we are
Speaker 1: not going to default on the debt and everybody is
Speaker 1: snapped to attention. Does he have that sort of influence
Speaker 1: now the way he did in twenty eleven. The Senate
Speaker 1: is remarkably sidelined in all of this for several reasons,
Speaker 1: one of which is that McConnell has just said he's
Speaker 1: basically deferring to McCarthy. He's going to support McCarthy as
Speaker 1: the lead person on this and negotiating with Biden, well,
Speaker 1: I think it's entirely reasonable for the news speaker in
Speaker 1: his team to put spending reduction on the table. I
Speaker 1: wish him well and talking to the president that's where
Speaker 1: a solution lies. Mitch McConnell and Joe Biden are old friends. Actually,
Speaker 1: McConnell went to Biden's son's funeral. They have a personal relationship,
Speaker 1: and they cut deals. Before they cut a deal to
Speaker 1: ward off a fiscal cliff on taxes in twenty thirteen,
Speaker 1: they did have a role in the twenty eleven deal
Speaker 1: finding out how to finagle the budget cap and its
Speaker 1: definitions at the very last minute in saving the deal
Speaker 1: that Bayner and Obama were working on. So the fact
Speaker 1: that McConnell is sidelined, I think is very important here.
Speaker 1: He is also being challenged from members within his caucus,
Speaker 1: most notably Rick Scott. Rick Scott tried to run for
Speaker 1: majority leader. This is the Republican from Florida who put
Speaker 1: Medicare and so security cuts on the table. He has
Speaker 1: since walked that back. So you know, this is someone
Speaker 1: who's under pressure and sidelined at the moment. Liz Bloomberg
Speaker 1: pulled financial professionals and in their opinion, there's less than
Speaker 1: a ten percent chance that the US will default. Are
Speaker 1: they right? Do you think Congress will reach a deal
Speaker 1: in the end? I agree with Eric that there's a
Speaker 1: lot of risks. I would hope the cooler heads prevail
Speaker 1: and ultimately know that the detrimental and long lasting effects
Speaker 1: of a default are just immeasurable that you just can't
Speaker 1: risk that. So I do. Maybe it's a little bit
Speaker 1: of hope, but I think something will come. I don't
Speaker 1: know if it's going to come without some dire cost beforehand.
Speaker 1: But like I said, you would hope that cooler heads prevail,
Speaker 1: and there's an understanding that an actual default on the
Speaker 1: US Treasury debt would be catastrophic. Well, the proof will
Speaker 1: be upcoming. Steps that listeners should pay attention to is
Speaker 1: the House Republicans are going to develop their own budget
Speaker 1: in response to the Biden budget. What does that look like?
Speaker 1: Do they all unify behind that? If there's a unified position,
Speaker 1: that sets off potentially real negotiations with Biden and McCarthy.
Speaker 1: If they can't unify, if they look like they're in disarray,
Speaker 1: I actually think this will drag out longer because Democrats
Speaker 1: will feel like they have the upper hand there. You know,
Speaker 1: there's going to be several months of wrangling over this,
Speaker 1: and it really depends on what Republicans, when they come
Speaker 1: down to it, put forward as their next offer. I
Speaker 1: think Wall Street is going to get more religion on
Speaker 1: the concern as the months go on. I think what's
Speaker 1: making it harder for them Eric too, is they're not sure.
Speaker 1: This is how traders work. Where to gauge you know,
Speaker 1: what do I avoid? You know, like which exact bills
Speaker 1: should I not buy. And I don't mean this flippantly,
Speaker 1: but Wall Street has a lot on their plate. They're maneuvering.
Speaker 1: You know, China's reopening, is that adding to inflation. There's
Speaker 1: so many things that the dead ceiling. They're concerned, but
Speaker 1: they need to have it be more crystal clear. Once
Speaker 1: we get through maybe tax season and Janet yelling can
Speaker 1: be more clear on the cash flows. And when they're
Speaker 1: going to hit that wall, then I think you're going
Speaker 1: to see and mass people avoiding any treasury bills or
Speaker 1: notes and bonds that have interest payments. Around that time,
Speaker 1: I think they're going to get more concerned. It's just,
Speaker 1: you know, among all the things, they can't quantify it
Speaker 1: enough to price it and trade it. I think markets
Speaker 1: have a very important role to play here. And this
Speaker 1: is why we make up to the brink is because
Speaker 1: only when markets start to react, when the public start
Speaker 1: to react, and the deadline becomes clear, that Congress then acts. Congress.
Speaker 1: You know, I've covered it for more than a decade
Speaker 1: and they always act like a college student with a
Speaker 1: term paper. They don't finish it until the actual deadline,
Speaker 1: and the markets will make that deadline for them. Liz McCormack,
Speaker 1: Eric Wasson, thanks so much for coming on the show,
Speaker 1: Thanks for having us, Thank you, thanks for listening to
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