Political game of chicken

The game of chickens in the political arena can lead to economic malaise; the United States is on the verge of it. The deadlock between President Biden and Speaker Kevin McCarthy has amplified the severity of the question, “Is the US really going towards a default? This question, even its imagination, is enough to send chills down the spine, for the aftermaths of the ‘unlikely’ US default is going to be catastrophic, not just for the US but for the global economy. As rightly said, “When America sneezes, everyone else catches the cold.” The US, since 1917, has been setting statutory limits on the total amount of debt a government could raise, which has increased by more than 100 times. The current debt limit stands at $31.4 trillion, already hit in January 2023, after which the borrowing has been halted. The US treasury having $95 billion currently in the bank, requires another $550 million by the end June. Treasury Secretary Janet Yellen has warned that a default could be triggered from 1 June, and the situation may be aggravated. The scenario may be unforeseen, as the US has never defaulted ever on its debt, apart from 1979, when a technical glitch led to delayed bond repayments. In 2011, the US managed to duck and run the default through a last-minute deal, which led to a downgrade of the country’s top-notch credit rating.