Published on 30 May 2023 on Zacks via Yahoo Finance
The debt deal involves a cap on government spending, which could dampen the positive effect of fiscal policy on the US economy. The spending limits are expected to be applied starting with the fiscal year beginning Oct. 1.
Two weeks before the debt-limit deal, economists had expected chance of a recession in the coming year at 65%, a Bloomberg survey showed, quoted on Yahoo. The spending cap will likely worsen scenario. This means that the reduced fiscal spending could have a larger negative impact on the economy during a downturn. Cost of debt deal may result in a 570,000 jobs-hit to U.S. employment, per Bloomberg.
Stricter Fiscal and Monetary Policy