By Alejandro Freixes, CCNN Head Writer
Since the US is the most important economy (money maker) in the world, the current shutdown of the government caused by Republicans and Democrats fighting each other in Congress could harm other nations.
What began as a shutdown in Republican protest over the Affordable Care Act (Obamacare) health law, now charges full speed ahead into the debt ceiling – if the US doesn’t raise the limit on how much money it can borrow, then it could run short of cash! This, in turn, would throw other countries out of whack, causing a ripple effect of economic chaos.
Now, the president of the World Bank, Jim Yong Kim, warns the US that it is “days away from a very dangerous moment” because of its borrowing crisis.
The reason for the disagreement in Congress, is that Republicans basically think the US should cut expensive programs to save money rather than borrowing more cash it doesn’t have, while Democrats argue that the debt ceiling’s been raised without any issues many times before. By keeping the government shut down, Republicans hope to negotiate with Democrats on defunding the Affordable Care Act (Obamacare) and making spending cuts.
Kim, however, thinks both parties need to come up with a solution right away. Speaking at the World Bank’s yearly meeting in Washington, he cautioned, “The closer we get to the deadline the greater the impact will be for the developing world. Inaction could result in interest rates rising, confidence falling and growth slowing. If this comes to pass it could be a disastrous event for the developing world and that will in turn greatly hurt the developed economies as well.”
While political experts predict that Congress will come up with a short-term deal to avoid the debt ceiling, US President Barack Obama doesn’t want to just delay the solution. “It wouldn’t be wise, as some suggest, to just kick the debt ceiling can down the road for a couple of months, and flirt with a first-ever intentional default right in the middle of the holiday shopping season.” So, start saving your holiday gift cash now, because this could be rearing its ugly head again in a few months!
Images courtesy of Senate Democrats on Flickr.