WASHINGTON – Though global markets heaved a sigh of relief when the US Congress
averted economic calamity Wednesday by raising the debt ceiling, the saga has
left global businesses uneasy about continued political brinksmanship further
down the line.
The deal to raise the debt ceiling and end a 16-day US
government shutdown – a sequel to a 2011 crisis that lost the US its AAA rating
from S&P – set up the possibility of another showdown in early 2014. The
government will be funded only through January 17, while the debt ceiling
increase will carry the country through February 7, although new rules give the
Treasury Department more flexibility to pay its debts.
decision to raise the debt ceiling and approve a temporary budget for the
government was taken at the last minute, as expected, and did not solve the US
fiscal problem, as expected,” said Uri Greenfeld, the lead researcher at Psagot
The cloud of uncertainty did not disappear, but is simply
sailing toward February, he said.
Already, the effects of the shutdown
can be felt in the US economy, which due to its size has repercussions for
Israel and other world economies.
S&P calculated that the shutdown
reduced annualized GDP growth by 0.6 percent in the fourth quarter, costing the
economy some $24 billion.
Bloomberg’s monthly Consumer Comfort index
found that the share of people who believe the economy will get worse “jumped by
the most since the collapse of Lehman Brothers,” the event that set markets
spiraling in the 2008 financial crisis. Coupled with the high likelihood of
future standoffs, the uncertainty will have repercussions for the value of the
shekel as well.
An analysis by foreign exchange trader FXCM argued that
these crises weaken the dollar, which will make the shekel stronger, pressing
Israeli exporters. “The political cloud will continue to hover over the dollar
and weigh down the currency,” the analysis said.
One glimmer of hope is
that the political backlash against the shutdown will push politicians toward a
deal. According to the Pew Research Center, even Republicans have lost patience
with the Tea Party, whose representation in the House drove the
“The Tea Party’s favorability rating has fallen across most
groups since June, but the decline has been particularly dramatic among moderate
and liberal Republicans. In the current survey, just 27% of moderate and liberal
Republicans have a favorable impression of the Tea Party, down from 46% in
June,” the survey found.
Nearly half the general public views the Tea
Speaking before the House passed the bill that averted
the debt ceiling breach Wednesday night, US Congressman Chaka Fattah
(D-Pennsylvania) said that during his visit to Israel earlier in the week, the
leaders he met with “had difficulty understanding” the American political
“We can conduct the affairs of government in a way that gains
us respect around the world rather than befuddlement,” he said.