A Glimmer of Hope on Debt Ceiling/Default Talks
Author: Greg Valliere
January 30, 2023
BUT BOTH BIDEN AND McCARTHY are master deal-makers, and Wednesday’s meeting is an encouraging sign. Both men will probably agree to continue talking, and by spring there may be proposals from both sides.
ANOTHER ENCOURAGING SIGN is that McCarthy has taken Social Security and Medicare cuts off the table, and based on poor reviews, tax changes will be off the table as well. McCarthy said yesterday that defense cuts might be part of negotiations, but that’s an issue that bitterly divides Republicans.
McCARTHY HAS TO TREAD CAREFULLY, because a deal with the President could enrage hard-line House conservatives, who could seek to oust the House Speaker if there’s a compromise that allows for some spending increases.
WHAT’S NEW IN THE LAST FEW DAYS? There’s growing House support for across-the-board spending caps rather than digging into all 12 appropriations bills and the thousands of programs that can’t possibly be addressed individually. Spending caps have actually worked in the past few decades (until they expired).
THERE’S ALSO SUPPORT for passing a short-term debt ceiling extension in late summer, lasting a couple of months, and tying it to the massive budget that has to be passed before the new fiscal year begins on Oct. 1. Any effort to “kick the can” usually wins support in Congress.
ANOTHER TACTIC HAS LANDED WITH A THUD: A Republican effort to “prioritize” spending has no support at the White House. This scheme would allow for making interest payments, funding veterans’ benefits, etc., while shutting down funding for much of the government until there’s a deal.
WE’RE STILL COMFORTABLE WITH A 60-40 CALL that there will be a last minute deal, with a reduction in the pace of spending growth. A flat-out freeze in spending seems unlikely, but the growth of spending is likely to slow.
BIDEN’S MEETING WITH McCARTHY COULD BE A GOOD START: Others will enter the debate, including House Minority Leader Hakeem Jeffries and Senate Minority Leader Mitch McConnell. This won’t be easy – the Republicans eventually will have to make a formal proposal – but it’s still winter and the talks are about to begin already.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
For further information, please visit AGF.com.
©2024 AGF Management Limited. All rights reserved.
