President Obama is no longer directly involved in debt negotiations following the sudden deterioration of talks between his administration and house Republican leader John Boehner. Instead, Congress is looking for a resolution to the American debt crisis which has been tied to the issue of raising the debt ceiling. Still, the White House put pressure on Congressional leaders to find a solution by reminding them of potential market reactions to a seemingly dysfunctional political system. Asian markets opened down this morning with no resolution from the Congress.
What’s the Big Idea?
The current debt crisis is, in one sense, completely artificial. Most nations do not have a debt limit and America’s has been consistently raised without much fanfare in the past. But for better or worse, the moment has become a debate over the future of America’s spending, long profligate thanks to two foreign wars. The political class is playing with fire, both in terms of market reaction to a financially unstable America and constituent anger over the shameless political wrangling. Still, there is no agreement and in one week the nation’s credit will run out.