There is a very real possibility that the United States will go into default for the first time in its history. Unless there is an extraordinary development today, it will happen. And the consequences could be very serious for the economy.
A few years ago, when the House Republican leadership created a similar debt crisis, the U.S. credit rating was lowered.
Having political uncertainty regarding something as basic as approving payments for previously authorized expenses, is causing great concern among creditors like China, who are contemplating to move away from using the dollar as a universal currency due to the unpredictable global economic impact caused by this type of political crisis.
At the same time, a default would be a blow for the national economy. A lower U.S. credit status would mean an increase in payable interest, resulting in more federal funds that must be used to service this debt.
This should all be reason enough to abandon unyielding political positions that lead nowhere. However, that has not been the case.
The leadership of the House of Representatives, facing the possibility of a bipartisan deal underway in the Senate, presented a new proposal yesterday that had very little new about it. In reality, it was a renewed attack on Obamacare. While they are no longer insisting on destructing it, they want to change the law without going through the legislature.
The worst part is that this House proposal does not even have unanimous support from the Republican caucus. There are conservatives who are willing to force a default as long as they can impose an even more intransigent agenda.
The Senate proposal basically postpones the debate about the budget and the debt until early 2014, without many additional demands. This is not a solution.
We have already been down this road, believing that today’s differences can be resolved tomorrow. Nevertheless, this is a way to prevent a default and send a better signal to the world about the responsibility of the leaders of the world’s largest economy.
What’s necessary to achieve a deal today, is having the will to negotiate and putting the national inte rest above ideological agendas. These two factors unfortunately have not been present so far in the House.