Both sides in the debate know that the US debt ceiling has to be raised to save the US from default and losing its coveted AAA rating, but both sides want concessions from the other side before they will agree to it.
Without an agreement to raise the debt ceiling above its current $14.27 trillion ceiling by August 2nd US public sector workers may well not get paid and the money for social programmes will dry up.
There is also the matter of the US being unable to service its debts. The repercussions from a US default would be felt across the globe’s intensely interwoven economic infrastructure. It could lead to another massive economic downturn hurting everyone. Stock and bond markets across the world could well plunge.
There is even the fear that a deal needs to be done by tomorrow (Monday) morning to prevent the slide starting even before the deadline is reached.
So why don’t they just lift their debt ceiling another couple of trillion and argue the toss later?
On one side of the debate you have Obama’s Democrats. The Democrats are traditionally seen as the defender of the poor. They want to see the deficit reduced by taxing the rich more. In their view the rich have had it too easy for too long at the expense of the lower paid.
On the other side you have the Republicans, who want to see a large reduction in the size of the state where welfare and social programmes are concerned, believing that the rich can kick-start the economy if left alone.
Obama’s supporters think that he has already made too many concessions to the Republicans and many Republicans had been voted into the House of Representatives, which they now control, on a no tax rises ticket.
So neither side is up for giving ground ….. yet. Even though they know that the time to face the deficit is now.
Both sides are playing brinkmanship at a nuclear level. But who will blink first?