On Monday, January 14, President Obama announced he would not be open to negotiating the debt ceiling and would move forward with raising the limit. The national debt ceiling will be reached shortly which may lead to the United States defaulting on its debt potentially sending U.S. and world markets in a tailspin. During the White House news conference, he stated he would not cut government spending in exchange for the GOP’s vote to raise the debt ceiling. Republicans have stated that in order for them to agree to a debt ceiling increase, the White House would need to address and implement more spending cuts.
There has been chatter on Capitol Hill of President Obama using his executive powers to circumvent Congress, and execute a debt ceiling increase. House Republicans are scheduled to gather for a retreat on Thursday and Friday (January 17 and 18) in Virginia to discuss the debt ceiling situation.
The real estate sector would particularly suffer from the potential default of U.S. debts if the debt ceiling is not raised. The real estate industry is directly connected to and impacted by the U.S. economy. In 2007 when the subprime mortgage disaster hit across the world, there was a near shutdown of the commercial mortgage-backed securities market among a multitude of other market crises, including interest rate fluctuation and liquidity issues that are still felt today.
The national debt ceiling was last raised by Congress in August 2011.
IREM legislative staff will watch this issue closely and report any updates when necessary.