Editorial | Debt ceiling farce holds the world hostage
- The global financial system should not be put at risk by irresponsible squabbling in US domestic politics. If the US political system cannot responsibly handle the hegemony of its currency, global economies cannot be blamed for seeking alternatives to untangle themselves
The game of chicken in Washington is getting close to crashing. Just when people thought Democrats and Republicans were reaching a deal over the debt ceiling, the talks have stalled.
It has become a ritual for Republicans to use congressional approval for raising the debt levels as a lever to force a Democrat president to impose unrelated spending cuts. A quirk in United States law allows Congress to grandstand and hijack the fiscal process for political theatre. But the stand-off is not cost-free. The damage has already been done.
This Republican tactic, seen by many as either cynical or absurd, has shaken a long-standing faith in treasury debts and bonds issued by the US government, which supposedly would never default. Everywhere, investors must recalibrate expectations about what was, until recently, considered the safest type of investments in the world.
As a phrase, “debt ceiling” is a dangerous misnomer. That is probably why Republicans and deficit hawks like to use it. In reality, the US government is not asking to raise new borrowings, but for Congress to approve debt-raising that it has already authorised.
By artificially creating a periodic “debt ceiling crisis”, the whole world is held hostage.
