The debt ceiling drama is winding down but US politics won't stay out of financial markets for long.
Today, the US Senate voted on legislation to block the President's student debt relief program. The vote was 52-46 with moderate senators Joe Manchin of West Virginia and Jon Tester of Montana and independent Kyrsten Sinema of Arizona voting with Republicans.
The White House has already pledged to veto it and the Senate won't have the 60 votes to overrule him.
The fate of 43 million people eligible for up to $20,000 in debt relief now hinges on the Supreme Court and that ruling is expected this month. It's not yet clear exactly when the rulings will come but it's among 30 rulings that are expected in the current term, which traditionally ends in the last week of June.
The executive action from Biden forgave roughly $500 billion in debt, including $20,000 for Pell Grant recipients and $10,000 for other borrowers. Borrowers whose income was under $125,000 ($250,000 if married) in either 2020 or 2021 were eligible.
For the economy, roughly 43 million borrowers would get some relief and it would pay the full balance for 20 million.
If it fails (which should be expected given the makeup of the Supreme Court), that will put a dampener on spending. In Fed terms, I'd rank that as equivalent to a hike or two and it may be one of the reasons the Fed is thinking about a June pause.
