WASHINGTON, DC – Ever since the financial crisis erupted in 2008, media outlets and specialists alike have devoted much attention to anticipating negative shocks to the global economy. Today the focus is on the state of the Chinese economy, the timing of the US Federal Reserve’s normalization of interest rates, and the various policies under discussion in the United States’ presidential election campaign.
But the most damaging shocks often hide in plain sight – and then hit precisely when and where almost everyone thought stability would prevail. One such risk is that political partisanship will cause another disruption to the US federal government’s finances, weakening the American economy and roiling world financial markets.
This warning may seem strange. After all, the last big partisan fight (in 2013) over funding the government and raising the debt limit gained little for the Republicans who instigated it – other than significant damage to their reputation for responsibility. And the current Republican leadership, eager to strengthen their party’s electoral chances in 2016, very much wants to project an image of sober good sense.
Yet a major and destabilizing confrontation over public finance now seems unavoidable, particularly following House Speaker John Boehner’s surprise announcement that he will resign his position and his seat in Congress at the end of October. To see why, one need look no further than the House Ways and Means Committee, whose current chairman, Paul Ryan, is a leader of the hardline Republican insurgents who had scorned Boehner for being too willing to compromise with President Barack Obama and House Democrats.