October 9, 2013
President Obama on Tuesday said he is open to negotiations only after short-term government funding and debt ceiling increase bills pass Congress.
The President made the remarks in a press conference.
Each passing day of the government shutdown increases the chances that a broader compromise will be needed for a debt ceiling increase to pass Congress. Such a compromise could include some relief from the current across-the-board spending cuts implemented last spring. It is important to note, however, that such a deal has eluded Congress and the White House since 2011, when they dealt with the first so-called “fiscal cliff.” It also makes the passage of debt ceiling increase legislation more vulnerable, especially within a timeframe comfortable for financial markets.
The economy may suffer during this period, as rapidly changing headlines could potentially lead to slower hiring, lower spending on capital goods and consumer goods, and volatility in financial markets. A quick agreement on both the debt ceiling and the shutdown, on the other hand, could nudge the economy and markets back onto their pre-crisis growth path. For more on the government shutdown’s effect on markets and the economy, read the latest from TIAA-CREF Chief Economist Tim Hopper.
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