U.S. DEBT CEILING
No matter what party has controlled Congress or the White House, over the last 10 years, the process of raising the debt ceiling limit has become a partisan exercise. So far, the President, Senate leadership, and Speaker McCarthy have all agreed not to tie cost control and budget policy to raising the debt ceiling. However, we expect all sides will engage in partisan rhetoric throughout the process. As a result, our approach is to advocate for raising the debt ceiling, engage in constructive policy debates about budget reforms, and avoid the partisan fray.
A default would have far-reaching repercussions across the U.S. economy, negatively impacting businesses, households, and the government. With U.S. Treasuries serving as a benchmark for mortgages, car loans, credit cards, and corporate debt, a spike in interest rates would negatively impact sectors that rely on access to affordable credit.
The 2011 debt limit episode saw the S&P 500 Index plunge roughly 225 points (-16.8%) from the final days of July through the first days of August. Corporate bond spreads widened, by 56 bps on BBB, after S&P downgraded the U.S. government’s debt.
GM supports an increase in the debt ceiling to avoid the far-reaching repercussions that would result from a default.