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Debt vote helps create a sense of certainty

David Gura Feb 11, 2014
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Debt vote helps create a sense of certainty

David Gura Feb 11, 2014
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A plan to lift the country’s borrowing authority – and let the U.S. continue paying its bills – moves to the Senate after passing the House of Representatives by a 221-201 margin on late Tuesday. 

It’s a “clean” agreement, meaning there are no strings attached. The plan would allow the U.S. to borrow until March 15, 2015.

While it doesn’t have any loopholes to trip up expected passage in the Senate and a final signature into law by the White House, some economists say it will bring one thing with it: a heightened sense of certainty about the economy. 

“I think this is some positive news and provides much-needed clarity for the business community and consumers,” says Michael Brown, an economist with Wells Fargo. “For financial markets, a year is a long time,” says Kevin Logan, the chief U.S. economist at HSBC Securities. “And removing the threat of the debt ceiling showdown or a Treasury default is a positive.”

The threat of the government defaulting on its fiscal obligations makes markets jittery, Brown adds, and this deal is a welcome option to avoid worry turning into doubt.

“It removes the potential disruption that could occur to financial markets, notes Brown, “even if the probability is small, the consequences are devastating, catastrophic.

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