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ETFs in Focus on Biden-McCarthy Debt Ceiling Agreement
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President Joe Biden and House Speaker Kevin McCarthy have reached a tentative agreement that aims to lift the nation's borrowing limit for two years, preventing a possible US default. This deal gives much-needed relief to politicians and markets, removing the threat of economic upheaval that looms every time the debt ceiling needs to be renegotiated.
However, the duo must now navigate the deal into law before June 5, the date when Treasury Secretary Janet Yellen warns the government could exhaust its resources.
Operational Changes
A transformative deal in many respects, it proposes an assortment of amendments to government operations. Key among these are new limits on government spending, revised prerequisites for accessing government assistance, and reduction of regulatory burdens for energy projects.
Government Spending
The resolution involves maintaining non-defense spending at current levels through next year, followed by a slight increase of 1% in 2025. The "historic" spending limitations, as McCarthy puts it, feature cuts in certain areas, all achieved through appropriations adjustments.
Military Spending and Conservative Concerns
Military spending, widely supported across the political divide, is mainly exempt from these cuts. The deal bolsters the Pentagon’s budget, a move not well received by conservative and liberal lawmakers at the extreme ends of both parties. Still, fiscal conservatives at the Committee for a Responsible Federal Budget lauded the deal. iShares U.S. Aerospace & Defense ETF (ITA - Free Report) is thus a winner.
Social Programs
The deal introduces changes, encouraging beneficiaries to transition from dependence to active participation in the workforce. However, Medicaid, another key assistance program, remains unaffected. Health Care Select Sector SPDR Fund (XLV - Free Report) should thus be a maintained spot.
Energy Projects and Student Loans
The deal offers limited relief on permitting reform for energy projects, aiming to simplify the government's review process under the National Environmental Policy Act. Notably absent from the deal are green energy tax credits and White House plans to generate revenue by closing tax loopholes. Government’s support for iShares Global Clean Energy ETF (ICLN - Free Report) may take a backseat.
Furthermore, student loans, initially targeted by Republicans, remain untouched, leaving the debt forgiveness issue to ongoing court proceedings.
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ETFs in Focus on Biden-McCarthy Debt Ceiling Agreement
President Joe Biden and House Speaker Kevin McCarthy have reached a tentative agreement that aims to lift the nation's borrowing limit for two years, preventing a possible US default. This deal gives much-needed relief to politicians and markets, removing the threat of economic upheaval that looms every time the debt ceiling needs to be renegotiated.
However, the duo must now navigate the deal into law before June 5, the date when Treasury Secretary Janet Yellen warns the government could exhaust its resources.
Operational Changes
A transformative deal in many respects, it proposes an assortment of amendments to government operations. Key among these are new limits on government spending, revised prerequisites for accessing government assistance, and reduction of regulatory burdens for energy projects.
Government Spending
The resolution involves maintaining non-defense spending at current levels through next year, followed by a slight increase of 1% in 2025. The "historic" spending limitations, as McCarthy puts it, feature cuts in certain areas, all achieved through appropriations adjustments.
Military Spending and Conservative Concerns
Military spending, widely supported across the political divide, is mainly exempt from these cuts. The deal bolsters the Pentagon’s budget, a move not well received by conservative and liberal lawmakers at the extreme ends of both parties. Still, fiscal conservatives at the Committee for a Responsible Federal Budget lauded the deal. iShares U.S. Aerospace & Defense ETF (ITA - Free Report) is thus a winner.
Social Programs
The deal introduces changes, encouraging beneficiaries to transition from dependence to active participation in the workforce. However, Medicaid, another key assistance program, remains unaffected. Health Care Select Sector SPDR Fund (XLV - Free Report) should thus be a maintained spot.
Energy Projects and Student Loans
The deal offers limited relief on permitting reform for energy projects, aiming to simplify the government's review process under the National Environmental Policy Act. Notably absent from the deal are green energy tax credits and White House plans to generate revenue by closing tax loopholes. Government’s support for iShares Global Clean Energy ETF (ICLN - Free Report) may take a backseat.
Furthermore, student loans, initially targeted by Republicans, remain untouched, leaving the debt forgiveness issue to ongoing court proceedings.