News Column

World's Fears Rise of Fiscal Superstorm

October 4, 2013
financial gamble

WASHINGTON: A US government shutdown entered its third day yesterday with little sign of compromise between Republicans and Democrats, and concerns grew about the economic consequences.

The stand-off, prompted by Republicans' determination to halt President Barack Obama's health care reforms, appeared to be merging with a more complex fight looming later this month over raising of the federal debt limit. Some feared this could stymie any attempts to end the shutdown before the middle of October.

In a report yesterday detailing the potential economic impact of a default, the Treasury warned that failing to pay the nation's bills could punish US families and businesses with a worse recession than the 2007-9 downturn.

"A default ... has the potential to be catastrophic," the Treasury Department said. "The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

The shutdown was beginning to hit the factory floor.

Republicans have tried to tie continued government funding to measures that would undercut Obama's signature health care law. Obama and his Democrats have refused to negotiate on a temporary funding bill, arguing it is the duty of Congress to pay for a programme it has already authorised. The shutdown took effect at midnight on Monday, leaving nearly a million federal workers sidelined without pay.

If the funding issue does merge with the debt ceiling debate, the result could be a dangerous and unpredictable fiscal superstorm. - Reuters

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(c) 2013 Independent Newspapers (Pty) Limited. All rights strictly reserved. Provided by an company

Original headline: Fears of fiscal superstorm

Source: (c) 2013 Independent Newspapers (Pty) Limited. All rights strictly reserved.

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