I spoke the GRID‘s Matt Zeitlin about the chaotic start to the 118th Congress and what it says about the looming debt limit fight.
The speakership fight was a “stark confirmation of what we already knew — that the results of the election have empowered and emboldened hard-liners within the conference and weakened the hand of leadership,” Liam Donovan, a Republican lobbyist, told Grid. It’s not clear that “any speakership” — McCarthy or otherwise — could survive putting forward a debt ceiling increase that Democrats could live with. “The challenge over the next six to eight months will be finding some sort of mutually acceptable fig leaf that would avoid a downgrade or default scenario.”
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But since past debt ceiling standoffs have been resolved without a breach, it’s possible that either the White House or the House may be more comfortable holding to their position in the expectation that the other side would cave. Similarly, it’s possible that the financial markets may not start reacting to the possibility of a debt ceiling breach until much later in the process, providing little outside pressure to reach a deal. “I think the X factor here is whether the mess on display wakes up [Wall] Street. They have underreacted in the past assuming it would all work out, which in turn emboldens guys who insist it’s all Chicken Little stuff. They’ll probably have to feel some pain to do what’s necessary,” Donovan said.
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Read the full piece here.