OPINION: The next debt-ceiling crisis will flirt with default and maybe even cross into that territory for a matter of hours. The one after that will result in an actual default, ChuckJaffe writes.
With Congress raising the debt-ceiling and both sides of the aisle grumbling about the outcome, the debate over the mechanics of paying for the U.S. government’s obligations and the close call with default now fades back into obscurity.Assuming Congress won’t do away with the debt ceiling and push all spending debates into budget and appropriation legislation where they rightly belong, the country’s latest pullback from the edge of default won’t be its last.
That’s still the expectation, even though it’s worth noting that if U.S. Treasury Secretary Janet Yellen’s initial estimate of June 1 being the day the federal government would go into default had been correct — instead of being revised to June 5 — a default would have happened this time. That was the year when credit-rating agencies cut the United States’s credit score, removing America from their list of risk-free borrowers; the country’s credit rating hasn’t been restored since, though the government has never missed any of its payments.
Scott Wren, senior global market strategist at the Wells Fargo Investment Institute, said in a recent interview on my Money Life with Chuck Jaffe podcast that that while the media coverage of the debt ceiling scared people, he felt most investors recognized that Washington’s conflict is an opportunity [for investors] because in the end the U.S. is going to pay its principal and interest that’s due.
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