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Analysis – Debt ceiling: White House bets Republicans will blink under pressure

Trevor Honeycutt

Washington, Jan. 20 (Reuters)The White House refuses to negotiate a debt ceiling hike with Republican hardliners. Investorbusiness groups, and moderate conservatives warn of the danger of approaching default.

The high-risk impasse, which is widely expected to last for months, could be last-minute as the sides test each other heading into June, when the US government could be forced to default on its debt. .

The White House is calling on Republicans in the House to raise the debt ceiling to avoid economic chaos, but plans to highlight their threat to spending plans and the global economy, says an aide to President Joe Biden. says Ally.

before they approved a higher cap. Similar demand led to credit rating downgrades and financial market turmoil in 2011.

But given the unpredictable nature of Republican hardliners in the House, some Democrats say the White House strategy is risky.

Tobin Marcus said: “Part of the Republican caucuses in the House, and in the broader kind of conservative atmosphere, clearly argues that not reaching a deal with the Democrats is not the worst. There is,” he said. He served as Vice President Biden’s economic adviser during the 2011 debt ceiling battle.

Republicans invoke default alarmist ideas.

“We are not going to default. We have the ability to control interest payments and repayments, but equally we should not blindly raise the debt ceiling,” said conservative leader Chip Chip. Rep. Roy told Reuters.

2024 campaign focused on extremism

As the White House gears up for Biden’s anticipated re-election campaign, there’s a game of chicken. Biden, 80, is set to announce in February that he is planning to run for his second term, with aides citing a solid labor market, lower costs, and an “extreme” Republican plans to focus on the threat of

Some aides think he benefits a lot from being seen as the “adult in the room” facing the opposition trying to ruin the economy. Even if we reach an agreement on the debt ceiling soon, we plan to roll that theme out in the 2024 elections.

Biden fired some lawmakers on Monday ‘Financially insane’

Meanwhile, the economic situation remains complex.

Biden and U.S. officials have repeatedly said they believe they can slow economic growth to more sustainable levels without putting people out of work.A so-called “soft landing” is something the Federal Reserve is aiming for as well, but they say their goal is elusive.

retail sales December saw its biggest drop of the year, growth is waning In the consumption-driven US economy. Factory output, a barometer of the president’s goal to revive US manufacturing, also posted its biggest drop in almost two years last month.

Biden didn’t mention those numbers at the time of the announcement, but praised another economic report released Wednesday. producer price The administration’s biggest financial concern.

The trillions in spending approved during Biden’s first two years of presidency are expected to be distributed over the next few years. the white house says Help America grow and avoid recession.

Failure to raise the debt ceiling could be counterproductive.

“From both an economic and financial perspective, failing to raise the debt ceiling would be a disaster,” said David Kelly, chief global strategist at JPMorgan Chase & Co. JPM.N funds.

“Failure to raise the debt ceiling is the most immediate fiscal threat to the economy and markets in 2023, yet either we continue to ignore the deficit entirely, or we face an economy that is now completely infatuated. It could also be damaged by imposing more fiscal tightening on the drug of monetary and fiscal stimulus.”

(Reporting by Trevor Hunnicutt; Editing by Heather Timmons and Alistair Bell)

((trevor.hunnicutt@tr.com+1 (332) 219 1571; twitter.com/TrevorNews; Reuters message: trevor.hunnicutt.thomsonreuters.com@reuters.net)))

The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/analysis-debt-ceiling:-white-house-bets-republicans-will-blink-under-pressure Analysis – Debt ceiling: White House bets Republicans will blink under pressure

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