AMERICAN budget showdowns usually follow a familiar pattern. Confrontational rhetoric blazes in the run-up to a deadline to avert some crisis—either a government shutdown, or a default on debt—with Democrats and Republicans each blaming the other’s intransigence for a lack of progress. Then, at the last minute, a narrow agreement is reached to avoid disaster—at least, for a few months. This drama played out as recently as September. It was a surprise, then, when on October 26th President Barack Obama and John Boehner, the outgoing Speaker of the House, struck a deal to suspend the debt ceiling, a limit on government borrowing, a full week before the deadline. Still more surprising, the deal was wide-ranging, covering not just the debt ceiling but also spending limits for 2016 and 2017—numbers which did not have to be settled until December, at the earliest.
That the debt ceiling was suspended was not itself a shock; the alternative was catastrophe. The government was poised to exhaust its funds—and its accounting manoeuvres—on November 3rd. That would have led to a chaotic default on its obligations, either to bondholders or to welfare recipients. Markets never...Continue reading
Source: United States http://ift.tt/1P5OGfJ
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