Whilst the world watches the drama being played out in the US House of Congress and the Senate which will determine is the United States voluntarily allows itself to default on its debts, ratings agency Fitch’s has been fastest to react.
Nobody quite believes that American lawmakers will fail to agree to increase the US debt ceiling by the deadline of 17th October (erm, tomorrow, actually), but there are already doubts that an agreement can be passed into law in time. Fitch’s ratings agency has already warned that failure to raise the debt ceiling in time would result in a downgrade to the US credit rating, meaning it would lose its coveted AAA top grade rating. The Dow Jones fell by 133 points yesterday, nearly 1% of its value.
The impasse has been caused by members of the so-called Tea Party faction of the Republican party who hold right-wing views and are rabidly opposed to “Obamacare”; President Obama’s signature legislation, more properly known as the Patient Protection and Affordable Care Act. Government funding lapsed at the start of the month because of the Republican insistence that the budget should be linked to either a “defunding” of Obamacare or at least a twelve month delay in its implementation. The budget impasse lead to hundreds of thousands of public employees being laid off, museums, national parks being closed and even certain drugs trial suspended.
Senior Republicans fear that the debacle may hurt their party in next year’s mid-term elections. Senator John McCain told the New York Times: "Republicans have to understand we have lost this battle, as I predicted weeks ago, that we would not be able to win because we were demanding something that was not achievable."
To borrow a phrase from US protests against the Vietnam War: “The whole world is watching!”