There was a little eye-twitching on both sides for the first time yesterday in the staring contest between the White House and Congressional Republicans that is threatening the global economy.
The US government shutdown passed its 10th day, but it was the risk of an approaching debt deadline that has pressed Republicans into easing their demands in a bid to agree an increase in the borrowing limit and avoid a calamitous debt default when the US runs out of cash on October 17th.
Opposition to the Republican tactic of threatening doomsday scenarios to force a policy reversal by the White House has grown as world leaders, influential US business groups and even major funders to the party – the billionaire Koch brothers – have raised concern.
US billionaire businessman Warren Buffett has cautioned against using the debt limit as political leverage, saying it ought to be banned. “It should be like nuclear bombs, basically too horrible to use,” he said.
Adopting a new approach floated by Congressman Paul Ryan, last year’s vice-presidential candidate, Republican speaker of the House of Representatives John Boehner proposed an increase in the debt ceiling for six weeks, until November 22nd, if president Obama would sit down for negotiations.
Tea Party faction
This departure seems to have arisen from moderate conservatives within the Republican ranks winning out over the far-right Tea Party faction. They have pushed the party's leadership to take the nuclear approach of shutting down government in the fight to derail Mr Obama's healthcare law.
Republicans, more so than the president, have been getting it in the neck over a shutdown that has sent hundreds of thousands of workers home on unpaid leave, closed national parks and monuments, and disrupted the lives of ordinary Americans – all because of political brinkmanship.
They have ratcheted up pressure on Democrats by proposing Bills that would reopen parts of the government, funding for military veterans and treatment for children with cancer, knowing that the other side will reject them. The party has tried to use their defeat to cast Democrats as the villains.
And the threat of a US default is stirring action overseas. China moved to protect itself against the risk of the US failing to pays its bills. Hong Kong’s stock exchange demanded higher buffers for traders using short-term US government bonds as collateral.
The new Republican proposal is not the no-strings-attached or “clean” bill the White House and Democrats demand. They want a long-term increase in the $16.7 trillion debt limit and the full reopening of government with a new budget before any negotiations. Right now, Republicans are only willing to kick the debt-limit can a little down the road.
Glimmer of positivity
Despite the proposal falling short of what it wants, the White House responded with a rare glimmer of positivity.
Ahead of Mr Obama meeting House Republicans, spokesman Jay Carney said the president was “happy that cooler heads seem to be prevailing,” describing the proposal as “an encouraging sign”.
The spectre of a US default still remains, dominating the IMF-World Bank annual meetings this week in Washington where finance ministers from around the world gather. Many of the discussions at the meetings touched on the absurdity and futility of the US standoff.
IMF managing director Christine Lagarde yesterday summed up well the latest episodic brinkmanship on Capitol Hill. “I hope in a few weeks’ time we will look back and say, ‘what a waste of time that was because it was unnecessary’.”
