The American constitution vests legislative power in Congress. Over the coming days the political body may arrogate to itself a metaphysical power: transforming the utterly unthinkable into hard reality. By failing to raise America’s debt ceiling in time, Congress could drive the country into its first sovereign default in modern history. A collapse in stockmarkets, a surge in unemployment, panic throughout the global economy—all are within the realm of possibility.
The path to a default is clear. America has until roughly June 1st to raise its debt limit—a politically determined ceiling on total gross federal borrowing, currently at $31.4trn—or it will run out of cash to cover all its obligations, from paying military salaries to sending cheques to pensioners and making interest payments on bonds.
The country has faced such deadlines in the past, lulling observers into the belief that it will, once again, raise its debt limit at the last minute. But its politicians are more…
This article was written by and originally published on www.economist.com