United States should end its debt-ceiling hostage crisis

The trade in US Treasuries may be the most liquid, safest and deepest of financial markets. But it still has to rely on market confidence to function. That was what was threatened by the imbroglio in Washington.

The Republican-led fights over the federal budget and the debt ceiling called into question the full faith and credit of the US government to honour its debt. The American people and the rest of the world were held financial hostage as they watched the US threatening itself with a self-inflicted wound.

Standard & Poor's estimates the stand-off shaved at least 0.6 per cent, or US$24 billion, off annualised US fourth-quarter GDP growth.

In the end, the key players managed to pull back from the brink and arrive at a last-minute, temporary deal in the US Senate, one later cleared by the House of Representatives.

A disaster may have been averted, but this is no way to run a government, especially when it is that of the richest and most powerful nation in the world. Once may be accidental, but a second time looks like a deliberate assault on confidence.

The last time the Republicans threatened not to lift the debt ceiling - and, therefore, the ability of the US government to finance its debt - was in 2011. Will such scare tactics persist if their party does not get their way, which, this time, was over the size of the deficit and Obamacare, the near-universal health insurance law?