Earlier this week, President Obama announced he would not be open to negotiating the debt ceiling and would move forward with raising the limit. The national debt ceiling will be reached shortly, which may lead to the United States defaulting on its debt and potentially send U.S. and world markets into a tailspin. During a White House news conference, President Obama stated he would not cut government spending in exchange for the GOP’s vote to raise the debt ceiling. Republicans have stated that in order for them to agree to a debt ceiling increase, the White House would need to implement more spending cuts.
There has been chatter on Capitol Hill of President Obama using his executive powers to circumvent Congress to increase the debt ceiling. House Republicans are scheduled to gather for a retreat on Jan. 17 – 18 in Virginia to discuss the debt ceiling situation.
The real estate sector would particularly suffer from the potential default of U.S. debts if the debt ceiling is not raised. The 2007 subprime mortgage disaster resulted in a near shutdown of the commercial mortgage backed securities market, including interest rate fluctuation, liquidity issues, and several other market crises that are still felt today.
Congress last raised the national debt ceiling in Aug. 2011.
UPDATE: Movement to increase the debt ceiling occurred in the U.S. House of Representatives. House members approved the “No Budget, No Pay Act” on January 23. This is a short term solution with a debt ceiling extension until May 18. This extension allows Congress and the President to haggle over spending cuts and entitlement programs. Lawmakers raised the stakes in this bill by adding the “No Pay” section for members of Congress if they are unable to pass a concurrent resolution on the budget and appropriations.
UPDATE: The debt ceiling bill was approved by the Senate on January 31. To finalize the “No Budget, No Pay Act” President Obama will need to sign the bill into law. The Senate bill is consistent with the House bill that was passed on January 23. Sequestration or automatic spending cuts for all federal government programs remain the greatest obstacle to formulating a compromise by May 18.