The White House wagers that Republicans will capitulate to pressure on the debt ceiling

A growing number of investors, business organizations, and moderate conservatives are warning of the dangers of edging closer to a default, but the White House is refusing to engage in negotiations with hardline Republicans on raising the debt ceiling because they believe enough of them will eventually back down from their demands.

The high-stakes impasse is anticipated to persist for months, but it may come down to the wire as each side puts the other to the test before June, when the U.S. government may be obliged to stop making debt payments.

According to officials and supporters of President Joe Biden, the White House intends to highlight the House Republicans’ threats to spending plans and the global economy as it urges them to raise the debt ceiling in order to prevent economic turmoil.

White House spokesman Andrew Bates told TradingTwist that “leading congressional Republicans have explicitly admitted in the past that default would lead to an economic collapse, eliminating millions of jobs and decimating 401k plans.” However, staunch MAGA Republicans are suddenly supporting this conclusion.

On Thursday, the U.S. government reached its $31.4 trillion borrowing cap, which takes into account money the government has already spent. Republicans in the House want to slash government programs.

Before they will consent to a higher ceiling, they will make a similar demand; in 2011, this demand caused a credit rating fall and financial market upheaval.

However, some Democrats claim that the White House’s plan is fraught with danger because of the hardline Republicans’ unpredictability in the House.

Tobin Marcus, who advised then-Vice President Biden on economic matters during the 2011 debt ceiling debate, stated that “certainly there are segments of the House Republican caucus, and in the broader sort of conservative atmosphere, that is fairly explicitly making the case that it wouldn’t be the worst thing” to not reach a deal with Democrats.

Democrats deride the notion of default as hysterical.

“We won’t let the debt fall into default. We are able to handle interest payments and servicing. However, we also shouldn’t blithely raise the debt ceiling “Leading conservative lawmaker Chip Roy told TradingTwist.

Campaign focusing on extremism in 2024

The White House is gearing up for Biden’s anticipated reelection campaign as the game of chicken takes place. Biden, 80, is anticipated to announce his intention to seek re-election in February. According to aides, he will highlight the robust job market, declining prices, and potential challenges from “radical” Republicans.

Some strategists believe that Biden will benefit from the battle over the debt ceiling.

When facing an opposition that wants to destroy the economy, some of his advisors believe he has a lot to gain by being perceived as “the adult in the room.” Even if a swift debt ceiling resolution is reached, Democrats intend to use that subject in the 2024 election.

As the debt ceiling approaches, the White House is also drawing attention to Republicans’ hazy intentions to give some federal expenditures a higher priority than others and recommendations from others that Social Security spending is cut.

Biden labeled certain politicians as “fiscally demented” on Monday.

The economic situation is still not clear at this time.

Biden and other top American officials have often stated their belief that the economy’s growth can be slowed to levels that are more sustainable without eliminating jobs. The Federal Reserve also hopes for the so-called “soft landing,” albeit they have acknowledged that it may be difficult to achieve.

Retail sales dropped the most in a year in December, indicating that the U.S. economy’s consumption-driven expansion is slowing down. The president’s ambition to revitalize American manufacturing is measured by factory output, which saw its worst decline in nearly two years last month.

While a different economic report on producer pricing, also released on Wednesday, indicated progress in containing inflation, the administration’s top economic worry, Biden did not mention these numbers when they were first released. Instead, he complimented the report.

In a campaign speech on Monday, Biden claimed, “We’ve got the most robust economy in the world right now. We are currently performing better than any other big country in the globe.

The White House claims that the distribution of the trillions of dollars in expenditure allowed during the first two years of Biden’s presidency will aid American growth and fend off a recession.

It might work against us if we don’t lift the debt ceiling.

According to David Kelly, chief global strategist for JPMorgan Chase & Co (JPM.N) funds, failure to extend the debt ceiling would be “an unmitigated calamity” from both an economic and financial standpoint.

“While failure to raise the debt ceiling is the most immediate fiscal threat to the economy and markets in 2023, the damage could also be done either by continuing to ignore deficits entirely or by imposing very sharp fiscal restraint on an economy that is now completely dependent on the drugs of monetary and fiscal stimulus.”

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