On off

Written by The Financial Express | Updated: Oct 2 2013, 03:49am hrs
Every few months since the Lehman collapseor the election of Barack Obama, depending on ones perspectivethe US government teeters on the edge of some sort of financial apocalypse, sending global markets into a tizzy and introducing new economic concepts into the household lexicon. In 2011, for instance, people learnt about the debt ceiling, which became the Republican Partys equivalent of a hostage to extract concessions on federal spending cuts from the Obama administration, leading to the first-ever downgrade of the federal governments credit rating, and set up the trend of last-minute salvage deals. Late 2012 belonged to the phrase fiscal cliff, used to refer to the automatic and simultaneous increase in tax rates and decrease in government expenditure that wouldve kicked in January this year. Earlier in 2013 we discovered the sequester which was distinct from the other two crises only in that there was no eleventh hour rescue.

And so, in a demonstration of the vitiated relations between the Democrats and Republicans, the US is on the verge of a government shutdown, the first in 17 years. Essential services like social security and Medicare payments are unaffected, but several thousand federal employees will have to go on unpaid leave or work without pay. Moodys calculates that a two-week shutdown would shave 0.3 per cent off the GDP, and the prospect already has global stock markets spooked. That US politics is deeply polarised is well documented, but when Washington plays chicken with its economy, it has consequences for the rest of the world too. But we can only strap up for the show.