Goldman Sachs warns of a ‘real risk’ that America may default on its debt
“Congress appears unlikely to address the debt limit before the last minute, and there appears to be a material risk that Congress will fail to act by the October 18 deadline,” Goldman Sachs economists wrote in a note.
Wall Street added that “a fall in borrowing authority appears to be a real risk”, although the outage “may be brief”.
“While this is not our primary issue, we also believe there is a real risk that Congress will miss the deadline,” Goldman Sachs economists wrote in the report.
“It is impossible to completely rule out these or other steps, but we are skeptical that such moves will take effect this year,” the economists said in the report.
Goldman Sachs said one big flaw here is that it would likely force Democrats to set a new dollar amount for the debt limit, perhaps near $31 trillion, rather than just hanging it.
“Of course, these shortcomings are the reasons Republicans would want to ask Democrats to use them. However, this appears to be the most likely option at the moment,” the economists said.
Goldman Sachs stressed that any slowdown in borrowing power would likely be short-lived because “the response of the public and financial markets will likely force a quick political solution.”