The decision by Harry Reid, the majority leader in the Senate, to cancel next week’s planned recess in order to advance discussions on the US debt ceiling is a welcome indication that Washington is beginning to view the debt issue with more urgency. Viewed from overseas, the American political system has started to appear dysfunctional in recent weeks.
The atmosphere of political posturing does not build confidence that the longer-term problems in the US public accounts can be seriously addressed. And the country might one day need all the foreign confidence it can get. According to this week’s International Monetary Fund report on the American economy, a fiscal consolidation of 7.5 per cent of the gross national product will be needed to stabilise the debt ratio in the next five years. Washington should be focused on how and when such an adjustment should occur instead of attempting to score empty political points on the debt ceiling. Continue reading »