The last time Congress fought over raising the ceiling, Obama signed an increase on Aug. 2, 2011, the day the Treasury Department warned that U.S. borrowing authority would expire. Standard & Poor’s cut the nation’s credit rating.
Still, yields on 10-year U.S. Treasury notes declined to 2.56 percent on Aug. 5 and have continued to drop. The yield fell four basis points, or 0.04 percentage point, to 1.84 percent on Jan. 18, according to Bloomberg Bond Trader pricing.
House Republicans revised their strategy for the coming months’ fiscal debate with Democrats, saying on Jan. 19 they’ll agree to a three-month debt-limit increase without demanding spending cuts as part of the deal.
Debt-Limit Vote
Instead, Republicans will use a planned House vote on a debt-ceiling increase tomorrow to try to force Senate Democrats to adopt a budget to spell out their spending plan.
Darda said politicians are confusing cyclical and structural pressures on the budget.
“If the recovery picks up some steam and sustains itself over the next handful of years, the deficit will fall to more normal levels,” he said.
“The problem is, after about the year 2020, you start to get the interaction between demographics and rising per capita health-care costs, and that does, in a structural way, push deficits back up to unsustainable levels.”