There’s never a dull moment in the markets, but lately, the drama surrounding the US debt ceiling has captivated the attention of investors around the world. After an eventful long week of negotiations, it appears that an agreement has been reached. But other challenges lie ahead — which brings me to the good, the bad, and the ugly.
The good
It appears that the White House and House Republicans have struck a deal on raising the debt ceiling. However, I caution investors not to assume this is over until all the votes are counted in the House and Senate — passing the deal may not go entirely smoothly. According to most reports, Speaker Kevin McCarthy believes he can provide around 140 to 150 votes from his conference for passage. Minority Leader Hakeem Jefferies has been working based on the assumption that he’ll need to bring roughly 100 votes from his caucus, with many of those supporters coming from the more centrist New Democrat Coalition.
Many members of Congress are publicly reserving judgment as they continue to digest the bill. As members return to Washington today and convene with their colleagues tonight, the whip count will become clearer as the vote is expected on Wednesday after the markets close. Once the bill passes the House and is received in the Senate, the expectation is that there will be a demand from certain Senators to allow for some “show” amendments to be considered, prior to receiving consent to expedite the floor process. The intent of leadership of both parties in both chambers is to ensure this bill reaches President Joe Biden’s desk by June 5, the new X-date announced by Treasury Secretary Janet Yellen.
I harken back to a quote attributed to Otto von Bismarck, “Laws are like sausages. It’s better not to see them being made.” We might have some stomach-churning moments before the deal gets done, and there is still a chance the deal could be scuttled.
