Politics

October 3, 2013

Now, debt ceiling jitters

As talks to resolve the budget stalemate go nowhere, the bigger problem of a potential U.S. default on its debt enters the picture.

By Zachary A. Goldfarb
The Washington Post

(Continued from page 1)

click image to enlarge

After meeting Wednesday with President Obama, House Speaker John Boehner said the president “reiterated tonight he will not negotiate.”

The Associated Press

Related headlines

“Once we reopen government, I propose a House-Senate joint conference to work out the nation’s long-term fiscal challenges,” Reid said. “Both sides have priorities, but we want to move forward.”

The clash is starting to raise concerns in markets that the two sides will not find agreement before Oct. 17. Investors are already demanding much higher returns on U.S. Treasury bills that aren’t paid back until after that date, reflecting a higher risk assessment.

In daily market-monitoring discussions with Wall Street firms Wednesday, Treasury officials said there were new fears among investors that a deal might not be reached until the final hours, which would cause intense market volatility.

A U.S. default, which has never happened before, would lead to a dramatic cut in federal spending and delays in Social Security checks and could undermine the traditional U.S. role as a financial safe haven.

“There’s precedent for a government shutdown; there is no precedent for default,” Goldman Sachs chief executive Lloyd Blankfein said Wednesday after he and several other business leaders met with Obama at the White House. “We’re the most important economy in the world. We’re the reserve currency of the world.”

Both sides harbor hopes that the shutdown and the looming default deadline increase their political leverage.

“It’s pretty straightforward that the shutdown is hurting Republicans and weakening their standing,” a senior Democratic aide said.

But Republicans argue that the painful consequences of breaching the debt ceiling gives them more power to demand policy changes.

“This position that is being taken by the majority leader in the Senate, as well as the president, that there will be no negotiations, is not something that I think the American people would want,” said House Majority Leader Eric Cantor, R-Va.

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)


Blogs

More PPH Blogs