EDITORIAL - America the banana republic

If it intends to prevent a return to global financial turbulence and maintain America's pre-eminent place in the world, it is urgent that Congress end its latest bout of irresponsibility and begin to manage the country's economic affairs in a fashion not reminiscent of a banana republic.

This is how Washington appears at this time - a place of political hostage-taking, blackmailing and what some might consider as attempts at constitutional putsches.

Since the start of this week, for instance, the United States federal government has been on partial shutdown because of the failure of legislators to agree on a budget for the fiscal year that began on October 1.

The upshot is that up to 1.8 million federal employees are on furlough or at work without pay. Many federally funded programmes, impacting millions of people, are also in abeyance.

This cut in public spending and its impact on private consumption run the risk of impairing consumer and business confidence and, if prolonged, could push the world's largest and most influential economy back into recession.

GREATER RISK

If the budget issue is not bad enough, a potentially greater risk lurks around the corner: congressional misbehaviour on the debt ceiling.

The US government reckons that in a fortnight's time, it will reach the US$16.7-trillion limit on the federal debt. Congress, in the circumstance, will have to raise the ceiling if the federal government is to continue to legally borrow to pay its bills. Such adjustments used to be routine.

But since the advent of Barack Obama's administration, the debt ceiling, like the budget, has become hostage to domestic politics.

In the case of this year's budget, the Republican Party, which controls the House of Representatives, insists, in exchange for approval of an appropriations bill, on gutting Mr Obama's signature health-insurance scheme, essentially attempting to relitigate a matter previously concluded in the president's favour, by Congress, the electorate and the Supreme Court. The Senate, where Mr Obama's Democrats are in the majority, has pushed back against the Republicans.

STALEMATE

The result is the current stalemate. Now, the budget and debt ceiling issues might converge. The likelihood is that Republicans will attempt to leverage support for borrowing with the administration's capitulation on the health-care matter.

They will also raise the legitimate issue of the need for a credible strategy for the long-term management of the federal deficit, thereby maintaining control of the debt that is now 70 per cent of GDP.

But the brinkmanship that is now norm in Congress can't be the way to deal with a matter that is of concern not only to the United States; the whole world has a stake in the issue.

The dollar is the world's intervention currency and US treasury bonds are the benchmark for other nations' debt instruments. America is the world's biggest borrower.

Failure of Congress to raise the debt ceiling could not only lead to America's default and a lowering of its credit rating, but cause the global economy to falter.

Perhaps Jamaica, in this period of American dysfunction, should offer to oversee America's affairs under a United Nations mandate. For, whatever the shortcomings and however badly they may implement policies, Jamaica's parliamentarians are capable of agreeing on budgets.

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