President Joe Biden and House Republicans reached an agreement over the weekend to suspend the debt ceiling limit for two years. The safe passage of the bill through Congress is clouded with uncertainty as conservative GOP members have expressed their unhappiness over it.
Last week, rating agency Moody’s warned of putting the U.S.’s “AAA” credit rating on “negative” watch in the eventuality of the U.S. defaulting without a debt deal.
Chamath Palihapitiya, a Sri Lankan-born Canadian-American venture capitalist and SPAC sponsor, weighed on the threat of a rating downgrade and the potential implication.
What Happened: Palihapitiya suggested in an episode of the “AII-In” podcast aired on Friday that a credit rating downgrade may not mean much for the economy. He noted that Standard & Poor downgraded the credit rating of the U.S. from “AAA” to “AA+” in August 2011.
“You know what happened? Absolutely f***king nothing,” he said.
These downgrades don’t mean much, Palihapitiya said, adding that these third-party credit agencies are not particularly that accurate and sophisticated.
“They don’t know anything that you don’t know,” he said. These companies, according to the SPAC king, are in the business of putting a letter on a document and then selling access to that document.
“So, if you’re going to trust these guys to know what they’re saying either right or wrong independent of what side, you are outsourcing your decision-making to the wrong body, ” Palihapitiya said.
“I would tell you to ignore it and come to your own conclusion,” he added.
Palihapitiya also shrugged off the debt impasse as something that happens every couple of years.
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Why It’s Important: Even as Biden “strongly urge[d] Congress to pass the agreement right away and House Speaker Kevin McCarthy (R-Calif) said over 95% of the House Republicans were “overwhelmingly excited” about the deal, backroom developments. suggest it may not be a cakewalk.
Axios suggested, citing a source, that about 60 conservative GOP members are against the passage of the bill. Given Republicans have only a 222-213 majority in the House, Biden and team should rally around that many Democrats if the bill has to pass through unscathed.
Wednesday could be D-day for the House to discuss the bill, given the legal text has been prepared and made public.
If the maneuverings don’t yield the desired result, the president may have no option but to fall back on the 14th Amendment, which will give him the right to unilaterally pass the budget via executive order.
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Image and article originally from www.benzinga.com. Read the original article here.