In the midst of the continuing Government shutdown, Republican Speaker John Boehner has offered some major relief by promising timely action to raise the US debt ceiling and avert what threatens to be a larger crisis with global financial implications.
With the looming October 17 deadline for raising the US debt limit, Boehner has told groups of Republican lawmakers that he would not let America default on its debt in what is being seen as a blunt message to the extreme conservative fringe of his party. Alive to the possibility that this hardline segment will seek to upstage the debt limit revision, Boehner has said that a compromise deal would be so crafted as to attract adequate support of both Republican and Democratic members.
“The Speaker has always been clear that a default would be disastrous for our economy,” his spokesman Michael Steel said, but added at the same time: “He’s also been clear that a ‘clean’ debt hike cannot pass the House. That’s why the President and Senate Democrats should drop their ‘no negotiations’ stance, and work with us on a plan to raise the debt limit in a responsible way, with spending cuts and reforms to get our economy moving again and create jobs.”
Boehner’s assurances on the debt ceiling issue came in the face of warnings from President Barack Obama, the US Treasury Department and the International Monetary Fund that any default would jolt not only America, but the world economic system. “As reckless as a Government shutdown is... an economic shutdown that results from default would be dramatically worse,” Obama said at an event in Maryland, while a Treasury Department report warned that a default on US debts could trigger another global financial crisis like the one in 2008.
“Political brinksmanship that engenders even the prospect of a default can be disruptive to financial markets and American businesses and families,” the report said, noting any impasse over the debt ceiling could cause credit markets to freeze and the dollar to plummet. IMF managing director Christine lagarde raised concerns over a global crisis if American lawmakers did not get their act together. “The shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy. So it is “mission-critical” that this be resolved as soon as possible,” lagarde said in an address to George Washington University here.
The continuing shutdown crisis has prompted Obama to scrap his Asia visit next week and stay put in Washington to manage the crisis. He was to go to Indonesia and Brunei for participation in APEC and ASEAN summits respectively. “The cancellation of this trip is another consequence of the House Republicans forcing a shutdown of the Government,” White House Press secretary Jay Carney said.
“This completely avoidable shutdown is setting back our ability to create jobs through promotion of US exports and advance US leadership and interests in the largest emerging region in the world.” For all his reassuring words about US avoiding a debt default, Boehner held out no hope on ending the government shutdown anytime soon. President Obama has been urging Boehner to put to vote in the House the Senate version of the spending bill (without any rider on Obamacare), suggesting that it would immediately pass with Democratic support even if sections of Republicans were to vote against it.