POTENTIAL MELTDOWN (7)

Two years ago, the U.S. avoided a potential financial meltdown (albeit at the cost of its losing its AAA rating for the first time in history) by agreeing an eleventh hour deal to raise the federal debt ceiling. However, one of the prices of budget deficits since then is that that new ceiling is about to be breached, probably some time in October. Which means in turn that a new potential meltdown looms.

As in 2011, the battle lines have been drawn. The Republicans say that they will not agree to a raising of the debt ceiling unless the President and other Democrats agree a major concession such as the abolition of Obamacare. Since the House of Representatives has already voted 40 times to abolish Obamacare, without those votes getting anywhere in the Senate (let alone through a Presidential veto), agreement looks unlikely. In which case, as in 1996, the Federal Government will start to shut down sometime next month.

The U.S. constitution is carefully written in order to ensure that no part of the political process lords it over another. The upside of this is that there are many checks and balances; the downside is that if there is deadlock in Congress or between Congress and the President, then there is real deadlock. You would think that allowing the country to pay its bills would be something that every national politician could and should be able to sign up to. Unfortunately, there are more than a few American politicians who would rather be "ideologically pure" than sensible. It's going to be a tricky couple of months.

Walter Blotscher