Debt Ceiling News Today: What the "Clean" Deal Means for the U.S. Economy

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Debt ceiling news 2014: The House of Representative passed a one-year extension to the United States' debt limit on Tuesday evening.

Sen. Majority Leader Harry M. Reid (D-NV) has already said he would pass the bill, although Sen. Ted Cruz (R-TX) may demand a 60-vote threshold on the deal. With U.S. President Barack Obama's signature, the nation would no longer face the threat of defaulting on its debt of $17.2 trillion within the next couple of months.

The deal passed by a narrow vote, 221 to 201, with just 28 Republicans supporting a "clean" extension of the country's borrowing power.

With a "clean" deal, Republicans were unable to attach any demands to the deal, such as improving veteran benefits or delaying the individual mandate on the Affordable Healthcare Act.

Here's what this "clean" deal means for Congress, and what's next.

The Next Step in the Debt Ceiling Deal

The agreement is a welcome surprise to investors, who now will not have to deal with Washington uncertainty until after the 2014 mid-term elections.

But this deal doesn't eliminate problems down the road.

Hours before the vote, the head of the Congressional Budget Office told the Senate Budget Committee that the "large and growing federal debt" increases the likelihood of "fiscal crisis."

"The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards," Douglas W. Elmendorf testified.

And although Janet Yellen signaled no increase in interest rates is pending, the nation will face incredible service costs once rates do rise in the next few years. Should the U.S. debt hit $20 trillion in the next few years, the nation would pay $1 trillion each year in interest at a 5% rate.

So why did Republicans agree to this clean debt ceiling deal?

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  1. H. Craig Bradley | February 13, 2014

    DEBT DOES NOT MATTER IN POLITICS

    Nobody really cared about the loss of an ambassador in Benghazi last year. Neither does the stock market care about the national debt or its growth. The stock market, after all, only looks 6-12 months out, not to probable interest rate increases in 2-3 years MORE years. That would be in 2016 or so, just during or immediately after the Nov. 2016 presidential election. What matters most in the next two national elections is overall public mood or sentiment ( pretty high right now ) and the stock market. Stock market up, Democrats hold their seats for the most part. Stock market way down, Democrats lose in 2016. Little else really matters.

    None of the popular issues (noise) being debated, even dissatisfaction over Obama Care, will matter all that much in comparison. So, if Republicans are trying to hang their chances solely on public negativity towards Obama Care, they will get " triangulated" by Hillary in 2016. To win the Presidency, Republicans need a concerted message or theme that the public can understand that positively sells why they should be elected. If Republicans don't better communicate what they are and appeal to the masses of voters, guess what, they will lose. Obama Care is not enough all by itself. Neither is the debt. Public mood and the stock market ( and by implication, interest rate levels & house affordability).

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