By Matthew Rusling
WASHINGTON, (PNA/Xinhua) — An agreement on the U.S. debt ceiling appeared to be emerging Tuesday after much back and forth between the Democrats and Republicans in Congress, but the battle will likely see round 2 early next year.
That is because a deal is likely to raise the nation’s borrowing power only for a few months, setting the stage for more partisan brinkmanship in winter.
Thursday stands as a crucial deadline — the last day the federal government is certain to have enough money to pay its bills, and failure to raise the debt ceiling could cause all geo-economic hell to break loose, analysts said.
While the bill now under consideration in Congress would extend the country’s borrowing authority, the legislation would only last until Feb. 7. Once that date approaches, analysts expect both sides to again come out swinging in a knock-down, drag out fight.
What’s more, round 2 will extend to round 3 and beyond, as analysts said the battle will continue until there is a consensus across the political divide on the need to reign in massive U.S. spending, and there’s no telling how long that will take.
“No matter what deal we get, we’re going to continue to move from fiscal crisis to fiscal crisis,” Ford O’Connell, a Republican strategist, told Xinhua.
“They’re not going to actually default,” he said of Congress. “They’re going to reach a last-minute deal. We’re going to move from fiscal crisis to fiscal crisis until both sides achieve a grand bargain.”
With the U.S. spending heavily for more than a decade, the nation’s debt — around US$ 17 trillion — stands at roughly the same size as the economy’s total output value, which is nearly three times the level of debt in the year 2000.
“That can not continue, and when your debt is larger than the annual production of your goods and services, you’re in trouble as a country because it’s unsustainable,” O’Connell said.
Tuesday saw much back and forth between lawmakers as they came closer to cutting a deal before the looming deadline.
As the nation barreled toward its first-ever default, both parties played what some billed a fast-pace game of ping-pong politics — batting possible solutions back and forth throughout the day without settling on any details.
But as the day wore on, efforts at scoring political points subsided as the clock ticked toward economic disaster and lawmakers realized they had to act to prevent the markets from plummeting. In late afternoon, Democratic lawmakers emerged from a White House meeting expressing optimism that the debt default can be averted.
Leaders worldwide have warned of the disastrous consequences of a U.S. debt default, although analysts said lawmakers are unlikely to shirk the country’s debt responsibilities.
Speaking to reporters Saturday at the International Monetary Fund’s fall meetings, Chair Tharman Shanmugaratnam of the International Monetary and Financial Committee, an arm of the IMF, told reporters that the debt ceiling and chronic U.S. budget crisis is a “critical issue for all of us.”
The current U.S. political gridlock and ongoing budget impasse impacts confidence, and failure to instill confidence could impact private investment needed in the next phase of the recovery, he warned.
“Private investment hinges on confidence,” he said. “And if we don’t get a clear resolution … it’s going to be hard to see how that confidence is going to come back.”