US Shutdown: Hurray it’s Over… What Does This Mean

Hello Oliver Rawlings followers! Last Thursday morning I woke up anxious, looking to see whether the world economy had been pulled from the brink of disaster; in other words I was looking to see if the US Debt crisis had been resolved before the US economy had hit the $16.7 trillion debt ceiling, which it was due to hit that day. Thankfully, a deal had been reached. Current affair junkies around the world breathed a huge sigh of relief; the US economy wouldn’t drag us all into another global financial crisis.

As the largest economy in the world (China hasn’t quite caught up yet, give them a decade or two) if the US had defaulted on their debts to international creditors it would have been dire. Some Republicans tried to suggest it wouldn’t be, saying it would force the US to live within its means, but it really would have been, as US capital vital for continuing the international economic recovery. So, what does this all mean?

Well, unfortunately the legislation agreed on is hardly life changing. It doesn’t really do much. The whole situation came about in the first place because hard liners in the US Republican controlled House of Representatives saw first the 1^st October deadline to agree funding for US government and secondly the 17^th October Debt ceiling deadline as chance to strip funding from the Obamacare initiative (a plan to ensure healthcare for every American). They grappled with President Obama and the Democratic controlled Senate. The 1st October deadline passed; non-essential government departments shut down, the world worried. They eventually came to a deal and the Republicans gave up the Obamacare fight with only one minor concession.

However when you look at the plan itself, you realise that not much has actually been solved, rather, as many US commentators are saying, the metaphorical can has been kicked up the road, to be dealt with at a later date. The debt ceiling has been extended until 7^th February 2014 and the government has been funded until 15^th January. This has happened before, it happened during a similar fiscal crisis between the Representatives and the rest of the legislature in 2011. Back then a number of ‘cuts’ to public spending were endorsed; however a closer look discovered that they were mostly phantom cuts that didn’t really do anything.

So many people are now saying that it’s only going to be a (short) matter of time until we have to deal with all of this all over again. Quite frankly when we look at the history, there is a likelihood of this, that we’re going to go through this drama all over again. The only bright spark on the horizon is that the agreement featured the promise to create a committee comprised of all parties to prevent these events recurring. The only question now is, can both sides finally put aside their differences and actually agree on something?