Somewhere over a cliff

Once again,the US’s deeply polarised politics has created the spectre of an economic meltdown.

Written by The Indian Express | Published: October 3, 2013 2:23:28 am

Once again,the US’s deeply polarised politics has created the spectre of an economic meltdown.

The only element of surprise in this fall’s resumption of the depressingly familiar chicken dance in Washington DC,with Republicans and Democrats pushing each other — and the economy — to the brink of destruction in some sort of misguided game theoretic experiment,is the failure of the two parties to come to an eleventh hour compromise-in-name-only. Locked in partisan deadlock,Congress missed the October 1 deadline to approve a new budget,with the result that the federal government is now in partial shutdown for the first time in 17 years. Though its impact on the global economy is peripheral — for now,all bets are off on whether the shutdown will extend into weeks or months — several hundred thousand federal employees have either been furloughed or told to work without pay.

Of greater concern is the looming deadline to raise the debt ceiling. If Congress fails to make up soon,the Republicans might commit a rather catastrophic act of economic vandalism and refuse to raise the ceiling — the legal limit on the amount of money the US government is allowed to borrow. Failure to raise it will prevent the government from paying for debt it has already incurred,which would lead to the first US default in history. Cue global financial trouble.

The US economy,arguably the world’s most consequential,has been lurching from crisis to crisis. The first round of the debt ceiling fight in 2011 over Obamacare and government spending led to the first credit downgrade in US history. Since then we’ve also talked about the fiscal cliff and the sequester,which,like the debt ceiling,were entirely self-inflicted and driven largely by the Republican inability to separate the debate over Obamacare from routine government funding. It is this obstructionism over the affordable care act in combination with US law that has allowed Congressional dysfunction to reach this pitch.

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