The U.S. debt deal, which has averted a disastrous U.S. default, is expected to be approved by the Senate and the House of Representatives. Last month’s negotiation tragedy in Washington, has proven the interrelationship between politics and multi-dimensional economic interests. It is not only a U.S. phenomenon but a global reality, which shapes both policies and political decisions in today’s world of our global economy:
The US Congress settled on a deal to reopen the federal government and avoid default on America’s debt just hours before the Treasury Department would have lost its authority to borrow money. Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell forged an agreement whereby the US government will be funded until January 15, and its borrowing limit will be extended through February 7. At press time, the deal was awaiting approval in both the Senate and the House of Representatives, but leaders from both parties implied it would go through. It was expected to pass late at night, clearing the way for it to arrive on President Barack Obama’s desk to sign before the deadline on Thursday. Fitch Ratings, one of the three main global credit ratings agencies, warned Congress this week that its paralysis might lead Fitch to lower it evaluation of America’s creditworthiness. But markets, evidently numb to the politics of Washington, barely slipped through the crisis and rallied on Wednesday upon word that a deal had been reached. Congress has never come so close to breaching the debt ceiling ($16.7 trillion before the deal) as it has over the past 16 days, since Congress first failed to pass a resolution that would fund operations of the federal government.
More importantly, the U.S. debt deal is offering America’s economy the necessary flexibility to move forward, and the federal government to properly operate by covering its short-term financial needs:
“The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid, D-Nev., who negotiated the agreement with Senate Minority Leader Mitch McConnell, R-Ky. ”This has been a long, challenging few weeks for Congress and for the country. It is my hope that today we can put some of those most urgent issues behind us,” McConnell said. After the Senate vote, President Obama made a brief statement praising leaders of both parties for accepting the deal. “My hope and expectation is everybody has learned that there is no reason why we can’t work on the issues at hand, why we can’t disagree between the parties while still being agreeable, and make sure that we’re not inflicting harm on the American people when we do have disagreements,” Obama said, House Speaker John Boehner, R-Ohio, who led the unsuccessful GOP effort to dismantle the president’s healthcare law in the fight, announced early Wednesday that he would not block the Senate deal and he urged GOP lawmakers to support it.
The U.S. debt deal brings good news to the more than two million federal workers, who are going to be paid and get back to their daily service:
The legislation would permit the Treasury to borrow normally through Feb. 7 or perhaps a month longer, and fund the government through Jan. 15. More than 2 million federal workers would be paid — those who had remained on the job and those who had been furloughed. At the White House, Mr. Obama hailed the Senate’s vote and encouraged the House to follow suit. Once the measure reaches his desk, he said, “I will sign it immediately. We’ll begin reopening our government immediately and we can begin to lift this cloud of uncertainty from our businesses and the American people.” As debate began in the House, Rep. Harold Rogers, R-Ky., said, “After two long weeks, it is time to end this government shutdown. It’s time to take the threat of default off the table. It’s time to restore some sanity to this place.” The stock market surged higher at the prospect of an end to the crisis that also had threatened to shake confidence in the U.S. economy overseas. Republicans conceded defeat after a long struggle. “We fought the good fight. We just didn’t win,” conceded House Speaker John Boehner as lawmakers lined up to vote on a bill that includes nothing for Republicans demanding to eradicate or scale back Mr. Obama‘s signature health-care overhaul. ”The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid, declaring that the nation “came to the brink of disaster” before sealing an agreement. Senate Republican Leader Mitch McConnell, who negotiated the deal with Reid, emphasized that it preserved a round of spending cuts negotiated two years ago with Mr. Obama and Democrats. As a result, he said, “government spending has declined for two years in a row” for the first time since the Korean War. “And we’re not going back on this agreement,” he added.
Finally, the keyword remains: debt… How governments handle their debts globally is a crucial challenge of financial leadership ( look at what is happening in the Eurozone). Politicians have a central responsibility for effectively handling difficult situations even negotiation deadlocks and finally avert chaotic situations. The U.S. debt deal is a today’s reality.