REPUBLICANS in the US House of Representatives yesterday tabled a bill that would suspend the debt ceiling until 19 May.
Instead of raising the debt limit it would allow spending of any amount to be funded by selling extra debt – but the cap on total borrowing would kick back in during May.
The bill would also hit politicians with personal financial incentives – if Congress cannot pass a budget by 15 April then all their earnings will be withheld until they do. If they did pass a budget, it would be the first in four years, with funding since then largely being authorised through other means.
Those markets not closed for Martin Luther King day – a US public holiday – reacted rapidly. German Bund futures sunk on lower demand for alternative low-risk assets, while spot gold edged up 0.3 per cent. The FTSE100 climbed by just under 0.8 per cent, though volumes were low due to the poor weather.
The US federal government officially reached its borrowing limit on 31 December last year. It has been using accounting tricks to avoid defaulting since then, but says these will run out between mid-February and March this year.