Biden Optimistic About Debt Ceiling Deal Ahead Of Key Tuesday Meeting, But Republicans Aren't Buying It

Zinger Key Points
  • President Biden is meeting with Congressional leaders about the debt ceiling on Tuesday.
  • Uncertainty ahead of the June 1 debt ceiling deadline could rattle financial markets.

The biggest catalyst for the SPDR S&P 500 ETF Trust SPY in the next few weeks could easily be a U.S. debt ceiling deal between President Joe Biden and House Republicans. Yet the latest news from Washington suggests the two sides are still far apart in the negotiation process, leaving open the possibility of a chaotic U.S. default as soon as June 1.

What Is The Debt Ceiling? The U.S. debt ceiling is a restriction Congress has placed on how much money the U.S. government can borrow to pay its bills, such as the costs of military operations and social programs.

Since the U.S. regularly spends more money than it takes in, Congress must raise the debt limit on a frequent basis. Congress has changed the debt ceiling 78 times since 1960. It now stands at $31.4 trillion.

Related Link: Biden Talks Tough, Elon Musk's Hyprocisy, Erdogan Staring At Runoff And More: 5 Key Stories You May Have Missed From The Weekend

What's The Latest? On Sunday, Biden told reporters he's optimistic he can reach a debt ceiling deal before the looming deadline.

“I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we’ll be able to do it,” Biden said.

House Speaker Kevin McCarthy said Monday that the two sides are still "far apart" ahead of a key meeting on Tuesday that will include Biden, McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell.

"It seems like they want to look like they’re in a meeting,” said McCarthy. “They’re not talking anything serious.”

Related Link: Trump Vs Biden 2024 Showdown Would Be 'Rematch from Hell,' Former GOP Representative Warns

Biden previously rejected a House Republican proposal to raise the debt limit by $1.5 trillion or through March 2024, whichever comes first. That proposal also included $130 billion in federal spending cuts for the upcoming fiscal year.

Biden has said he wants a clean debt ceiling increase that is not attached to any federal spending cuts.

The S&P 500 traded higher by 0.3% on Monday ahead of the meeting.

"Stress in the banking sector and uncertainty over the debt ceiling has weighed on sentiment," John Lynch, Chief Investment Officer for Comerica Wealth Management, said Monday "Though valuation remains a concern given interest rates and inflation, we are also puzzled by perception that stocks are doing well in the face of all these challenges."

He notes the S&P 500 has not made new highs since February 2. 

Benzinga's Take: After months of insisting he would not negotiate with Republicans who were "holding our economy hostage," Biden himself described the ongoing talks as "a negotiation" on Sunday.

Raising the debt ceiling has become an increasingly politicized event in recent years, but Congress has not yet let the nation go into default just to gain political leverage.

Photo via Shutterstock. 

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Analyst ColorNewsPoliticsTop StoriesMarketsAnalyst RatingsGeneralComerica Wealth Managementdebt ceilingJohn Lynch
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!