Impasse remains as United States deadlock continues

Politicians are still struggling to come up with a deal to prevent the United States from defaulting on its debt.

The failure of Republicans and Democrats to agree to a budget by October 1 led to the shutdown of non-essential government services for the first time in 17 years.

More than 700,000 federal workers were sent home without pay. Government buildings and services, museums, monuments and national parks closed down.

The deadlock was rooted in Republican attempts to block funding for Obamacare (the Patient Protection and Affordable Care Act).

Could a similar situation happen here in Bermuda? The Bermuda Sun asked public affairs experts and economists to comment on the issue.

Cordell Riley, managing director of business consulting firm Profiles of Bermuda, said: “No — the US has a different system of government then we do. They have a two-camera elected legislature, controlled by two parties. 

“When they don’t agree, the potential for gridlock is real. If they dig their heels in, the US Government could shutdown. 

“While we have a two-camera legislature, only one is elected. The Senate, the un-elected body, does not have the legislative power to block financial bills so the government of the day can function without the potential of gridlock.”

He said the impact of the shutdown on Bermuda would be “slim”.

Mr Riley added: “While some estimates put the cost of the shutdown at $300 million per day, and Goldman Sachs estimates that a three-week closure could have shaved as much as one per cent off the GDP this quarter, the US business community has not shown great concern. 

“And the reason for this is that they did not anticipate the shutdown would last for any length of time.” Peter Everson, co-chair of the Bermuda Chamber of Commerce’s economic advisory committee, also said a “shutdown” was unlikely here.

“The Westminster system of government is fundamentally different to that of the US,” he said. 

“Here the ‘winner takes all’ system means that the governing party always has a majority in Parliament and so will always pass a bill to increase the debt ceiling as it only requires a simple majority.”

But he said in the US, it was “difficult for elected officials to deal with all manner of long-term problems. 

“Kicking-the-can-down-the-road is now the fastest growing sport in the US. 

“Thus refusal to address the consequences of unsustainable levels of consumption, with the attendant chronic increase in debt, is leading to the slow decline of the US from its once preeminent economic position.”

Economist Craig Simmons said: “The issue of the US defaulting on its debt is only a symptom of a broader problem: US consumers, businesses and governments have been living beyond their means for decades.  

“As a result, they have accumulated a dangerous amount of credit card, student loan, mortgage, business and of course, government debt.”  

He added: “History is clear: people get over defaults and move on. People will forget the lesson that excessive debt accumulation is bad once the deleveraging process reaches an acceptable level.” n