The stability of financial markets and federal benefits for tens of millions of Americans rely on lawmakers finding a long-term solution by early December.
The U.S. House will likely pass a bill Tuesday that would prevent a historic U.S. debt default this month by raising the federal debt limit through early December, but experts warn the temporary measure—a byproduct of failed negotiations for a long-term solution—only delays decisions that may hamper markets, particularly if Democrats are forced to scale back the terms of President Joe Biden’s massive policy agenda. „The drama is far from over,“ Lindsey Bell, the chief investment strategist at Ally Invest, wrote in a Tuesday email, saying the solution to debt limit negotiations may ultimately lie in trade-offs within the social spending bill, which Democrats are also looking to pass using reconciliation despite opposition from moderate party members. Bell cautions Democrats may propose spending cuts or higher-than-expected taxes in the spending bill to help limit debt increases in the future—two measures that would each reduce corporate growth expectations. „That would weigh on stocks,“ she adds, noting „the nature and size of cuts will be key to the market’s reaction.
