Skating Close to the Edge, Again, on the Debt Ceiling
The US Treasury has warned Congress that the debt ceiling raising time again, and as before, the Republicans are dancing around trying to tie the debt ceiling to one or another of their pet causes.
Treasury Secretary Jacob J. Lew says the day of destiny this time is Feb. 27.
The last debt ceiling showdown hurt economic output, employment, and America’s standing among global investors, experts say.
Flirting with default comes with costs, even if the government never misses a single payment, experts said. A new study from the Peterson Institute for International Economics, a research group based in Washington, suggested that the cost of last year’s fiscal standoffs lopped roughly a percentage point, or $150 billion, off economic output and cost 750,000 jobs.
Around the world, the perception of Treasury debt as being absolutely safe has shifted, said Adam S. Posen, president of the Peterson Institute and a former central banker at the Bank of England. Managers of sovereign-wealth funds in countries like Norway and Singapore are rethinking their exposure to the dollar, he said.
“The dumb money says, ‘Every time I reacted to a debt deliberation in the United States, I overreacted and lost money,’ ” he said. “But the smart money knows the market has been changed by this uncertainty.”