{"id":19557,"date":"2023-06-07T15:24:59","date_gmt":"2023-06-07T19:24:59","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/debt-limit-agreement-sets-up-potential-showdown-for-2025\/"},"modified":"2023-06-07T15:25:00","modified_gmt":"2023-06-07T19:25:00","slug":"debt-limit-agreement-sets-up-potential-showdown-for-2025","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=19557","title":{"rendered":"Debt Limit Agreement Sets Up Potential Showdown For 2025"},"content":{"rendered":"
\n

The text of the latest debt limit deal has potentially set up the next installment of the drama for early 2025. Though the nature of that debate will depend on the outcome of the 2024 election.<\/p>\n

2023\u2019s Outcome<\/h2>\n

In 2023 a deal on the debt limit was reached a few days before the Treasury\u2019s estimate of heightened potential default risk or the so-called X-date. Stock markets were relatively unfazed by 2023\u2019s debate, though we did see impact on near-term U.S. Treasury yields. Still, there was no repeat of the 2011 market sell-off.<\/p>\n

The text of 2023\u2019s debt limit agreement sets up the next deadline. The current deal suspends the debt limit until January 2025, allowing the U.S. government to keep borrowing to pay the bills until then. Therefore, assuming no agreement beforehand, the next debt limit debate will take place soon after the 2024 election, possibly with new political leadership in place.<\/p>\n

Extraordinary Measures<\/h2>\n

Once again, it\u2019s likely that the U.S. Treasury will invoke extraordinary measures to push out the risk of default in 2025. This involves managing payments from government-administered pension and retirement funds to temporarily help pay the bills. In 2023, it is estimated by the U.S. Treasury and others that this added around 5 months to the X-date of potential U.S. default.<\/p>\n

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However, in 2025 the timeline will depend on the precise timing and amounts of government expenditures and tax receipts as well as the actions that the Treasury chooses to take under extraordinary measures. For example if the U.S. economy were in recession in 2025, it\u2019s likely the X-date could come sooner with lower tax revenues and larger government expenditures on benefits. Still it\u2019s reasonable to assume that the next X-date may occur in mid-2025 if there is no immediate agreement on the debt limit.<\/p>\n

Political Changes<\/h2>\n

For the debt limit debate it matters who\u2019s in power. If the Presidency and Congress are held by the same political party, then the debt limit has historically been raised without issue.<\/p>\n

However, as we saw in 2023, if different parties hold key positions in Congress and the White House then negotiations to raise the debt limit can be a drawn-out process. It\u2019s therefore, important to note that the next debt ceiling debate will take place after the 2024 election and so political leadership may change.<\/p>\n

For now, the debt limit is one less thing for markets to worry about. That said, U.S. debt does remain high in historical terms, which may present some economic risk regardless of the status of the debt limit. However, depending on the outcome of the 2024 election, 2025 could be the next year where the debt limit once again moves markets and draws headlines.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The text of the latest debt limit deal has potentially set up the next installment of the drama for early 2025. Though the nature of that debate will depend on the outcome of the 2024 election. 2023\u2019s Outcome In 2023 a deal on the debt limit was reached a few days before the Treasury\u2019s estimate […]<\/p>\n","protected":false},"author":1,"featured_media":19558,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-19557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nDebt Limit Agreement Sets Up Potential Showdown For 2025 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The text of the latest debt limit deal has potentially set up the next installment of the drama for early 2025. 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