The Congressional Budget Office (CBO) projects that US debt held by the public will reach a record high of 107% of GDP by 2029, despite the recent bipartisan debt ceiling deal. The CBO warns that such high and rising debt could slow economic growth, increase interest payments to foreign debt holders, and limit policy choices for lawmakers. By 2053, the CBO projects that debt held by the public could reach 181% of GDP, posing significant risks to the fiscal and economic outlook. Rising interest costs and spending on Social Security and healthcare programs are driving the gap between spending and revenue.
A mystery trader made a $7.5 million profit on Equitrans Midstream call options just days before the announcement of the inclusion of the Mountain Valley Pipeline in the debt ceiling deal. The timing of the trade has raised suspicions of insider trading, as the pipeline's inclusion was kept secret until the deal was announced. Congress members are prohibited from trading on confidential information, but a 2021 investigation found repeated violations of the STOCK Act. Ethics watchdogs are calling for an investigation into the matter.
Republican Representative Lauren Boebert claimed that she intentionally missed the House vote on the debt ceiling deal, which was brokered by House leader Kevin McCarthy and President Joe Biden, because it was a "c**p sandwich". However, reports suggest that she actually tried to attend but was too late. Boebert was one of the fiercest critics of the deal, which passed with overwhelming support from both parties, and had made her stance known on social media.
Despite concerns about a potential US recession, Wall Street saw a surge in stocks following a strong jobs report and a debt ceiling deal. The positive economic news has eased fears of a downturn and boosted investor confidence.
Student debt relief advocates were surprised to learn that the debt ceiling deal included a provision requiring the Biden administration to restart collecting federal student loan payments at the end of the summer. Advocates felt like they were used as a bargaining chip and that borrowers got the bad end of the deal. The White House disagreed, stating that the plan to end the payment pause in August was announced in November and that the administration protected the student debt relief plan from congressional Republicans. However, student debt relief groups argue that the end of the payment pause before the Supreme Court rules on broad-scale relief is reckless and tells student debtors that they are bargaining chips not worth fighting for.
Fitch Ratings may still downgrade the US credit rating despite the debt ceiling deal, citing increased political polarization and governance shortcomings. The US currently has an AAA rating from Fitch, but a downgrade would make it more expensive for the US to borrow debt and drain funding from other priorities. Fitch plans to make a decision by the end of September.
Senator Joe Manchin criticized Republicans for taking credit for the inclusion of a provision green-lighting the Mountain Valley Pipeline in the debt ceiling bill, saying he was the lead voice advocating for it. Manchin praised Republican leaders for supporting the pipeline but said it was ultimately his longstanding and persistent advocacy for the project that won the White House over. The pipeline has been significantly slowed by a lengthy permitting process, and environmental groups have vowed to challenge permits in court.
US stock futures edged higher after the House approved the debt-ceiling deal. Investors are focused on the US rate outlook and key data from China and Europe. A private gauge of factory activity in China bounced back to expansion in May, while eurozone consumer-price inflation came in at an annual 6.1% rate in May, the lowest level since February 2022. The yield on the 10-year US Treasury note ticked up to 3.668%.
The White House and House Republicans have agreed on limited changes to overhaul environmental regulations and streamline federal permitting as part of their debt ceiling deal. The final legislation includes provisions to speed up infrastructure projects under the National Environmental Policy Act, but it does not clear the way to build large-scale electricity transmission lines, instead ordering a two-year study of the issue. The legislation essentially ensures construction of the long-delayed Mountain Valley Pipeline, a $6.6 billion project to transport natural gas through Appalachia. The failure to agree on a more sweeping overhaul on permitting rules leaves an important item on Biden’s legislative to-do list.
Financial markets showed little reaction to the US House of Representatives' passage of a debt ceiling deal that would avert global financial turmoil and an all but certain recession. Stocks never fell in the lead-up to the vote based on expectations that Congress ultimately would reach an agreement to avoid default. Investors can return to fretting over a more familiar set of woes -- inflation, Fed interest rate hikes and the risk of a recession.
US stocks were mixed on Tuesday as investors await the outcome of the debt ceiling deal, which faces a crucial test in the House Rules Committee before an expected vote in the House on Wednesday. The yield on the benchmark 10-year Treasury dropped to 3.7%, while the two-year note yield slipped to 4.49% and that on the 30-year bond dropped to 3.89%. The major economic release of the week will be the US jobs report for May due out on Friday. Meanwhile, shares of Nvidia Corporation rallied over 5%, hitting a $1tn market cap at the open Tuesday after CEO Jensen Huang unveiled a host of new AI-related products and services the previous day.
The debt ceiling deal in Washington has caused some companies to emerge as winners. Pipeline company Equitrans Midstream spiked around 40% due to the agreement containing a call to speed up the creation of a stalled natural gas pipeline called the Mountain Valley Pipeline. Lending company SoFi is also expected to benefit as the deal calls for borrowers to start paying back federal student loans at the end of the summer. H&R Block and TurboTax owner Intuit are expected to benefit from the loss of funding to the IRS, which lowers the odds the IRS will build an expansive electronic tax filing system. The defense industry is also emerging largely unscathed from the debt ceiling battle.
The Dow Jones Industrial Average fell while tech stocks surged after President Biden and House Speaker Kevin McCarthy reached a deal to raise the debt ceiling. Housing data showed an unexpected rise in home prices. Nvidia hit $1 trillion in market capitalization for the first time. The House is expected to vote on the debt-ceiling deal Wednesday night. Best stocks to buy include Arista Networks, ASML, Salesforce, Boeing, and Taiwan Semiconductor. Tesla stock rose after CEO Elon Musk's visit to China. Dow Jones leaders Apple and Microsoft also saw gains.
Keith Olbermann criticized Democratic Sen. Joe Manchin for inserting approval of a natural gas pipeline for West Virginia into the tentative debt ceiling deal agreement, calling him a "putrid, unreliable, sheep in sheep’s clothing." The 303-mile Mountain Valley Pipeline has been tripped up by dozens of environmental violations and court fights, and left-wing environmental groups have criticized Manchin's pipeline as bad news for the nation. Olbermann praised Democratic Sen. Tim Kaine for introducing an amendment to "remove the pipeline" and save Biden from "pi--ing away the prestige of kicking McCarthy’s a--."
