Republicans took control of the House under a Democratic president a dozen years ago. At that time, the Tea Party was furious over bailouts. Even with a bunch of newcomers they were able to put up a united front. John Boehner was easily elected Speaker. A dozen years ago it was all about the debt and deficit. Obama’s 2009 stimulus package was seen as alarming but it’s nothing in comparison to Biden’s.
Debt ceiling negotiations
Republicans pushed to rein in spending by not raising the debt ceiling unless there was spending caps. The summertime fight between President Obama and the Republicans disrupted the financial markets then.
Between July 29 and August 8 the S&P 500 dropped like a rock to the tune of 17%. Even though the two sides reached an agreement, Standard and Poor was not happy and downgraded the credit rating of US debt.
Our debt shouldn’t be risky
The financial markets didn’t like the fight. Treasury prices soared after the downgrade instead of diving. Investors still liked the safety of US government bonds regardless because that rating change might have been more of a political statement as opposed to a risk assessment.
Can US debt be downgraded? It might not be possible since ours is the strongest economy in the world. Our treasuries might be the largest market and the safest asset. Every other financial instrument is judged according to treasuries.
Could be a fight here
The fight over the ceiling might look like the speaker vote fight. The limit was raised December 2021 to over $31 trillion. This should last until at least July 2023. The government will still be able to continue operations due to “extraordinary measures”.
Republicans are not going to “play chicken” with the debt ceiling. The GOP needs the senior citizen vote and Democrats will make sure that demographic knows how the ceiling will affect their income. It might not matter to Republicans though if there’s a fight over this due to the inflation crisis.