The sun will rise in the east. Water flows downhill. The debt ceiling will be increased. America will not skip out on paying its IOUs.
We count on these things happening. There is no alternate reality where America’s credit is no good. From mortgage rates to student loans, life insurance to money market funds, the primary starting point for all of these is the credit of the United States. When it is questioned, so will be every other financial asset. Pretending otherwise is economic heresy.
This week, as the Aug. 2 deadline for the debt ceiling approaches, expect the investment markets to hang on the overheated political rhetoric of Washington. But the markets are certain there will be a deal. Perhaps it won’t be a grand bargain on addressing America’s unsustainable fiscal future, but rather an agreement between politicians to avoid mutual destruction.
Nothing is more important for the overall economy than the federal government hammering out a compromise to raise the nation’s borrowing limit. There is no plan to address the staggering number of unemployed Americans without raising the deal ceiling. There is no room to discuss efforts to tackle the explosive cost of health care. Forget about creating strategies to kindle better schools.
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Stock prices are up and interest rates are down, indicating investors are not worried about America’s credit standing.
The sun will come up, and the U.S. is good for the money.
Tom Hudson, anchor and managing editor of “Nightly Business Report,” can be followed on Twitter at HudsonNBR.