Finally a deal, of sorts, is close on the US debt crisis

Legislators are brokering an agreement that will put an end to the threat of another costly shutdown

New York

Political theatre can be costly. The shutdown that left parts of the US government in suspended animation earlier this year is expected to reduce fourth quarter growth in the world’s largest economy by anywhere from 0.2 to 0.6 per cent. According to a detailed report from the White House last month, servicing back-pay for the federal employees who were sent home – or to use the jargon, furloughed – will hit the government wallet to the tune of roughly $2bn.

But there was also a political cost: opinion polls in the wake of the latest fist-fight over the federal budget showed that ordinary Americans were growing increasingly impatient with their elected representatives. The GOP, in particular, saw ratings tumble.

Now moves are afoot in Washington to seal an agreement by the end of this week that might spare the country another round of economically risky theatrics in the New Year.

A special panel of legislators, put in place after the last round of bickering, has until Friday to find common ground over a deal to end the repeated budget battles that have bruised the US economy in recent years.

“I’m hopeful that... we can produce something that is smarter than the way we’re going about things now,” Eric Cantor, the majority leader in the Republican-controlled House of Representatives, said last week.

The stakes are high, and not just because of the threat of another divisive and damaging fight. Inaction would mean that, starting in January, the second round of the sequester – the package of deep spending cuts that began to come into force at the beginning of this year – would hit the still-weak US economy.

According to the Center for American Progress, a left-leaning think-tank, the cuts for 2014 will leave a hole that is $24bn (£14.6bn) bigger than the reductions endured by the US in 2013. Moreover, it said in a recent report, “many of the cuts that were legally made this year have not actually been implemented yet.” The result would be damaging for an array of government departments, including the Pentagon, and for the economy at large.

Mindful of the impact, the talks currently under way among lawmakers in Washington are moving towards a deal that would water-down the cuts, though a complete reversal remains unlikely.

But the agreement is likely to be limited in scope. By all accounts there still won’t be a “grand bargain” that would deal with the thorny issues of reforming entitlement programmes – a longstanding issue for Paul Ryan, the main negotiator from the Republicans in the current talks – or with the matter of closing tax loopholes, something that has long been on the wish-list of Democrats. Nor, according to The Washington Post, would the deal currently on the table tackle the country’s $17trn-plus debt pile.

Instead, the focus in the talks being led by Mr Ryan and the Democratic senator Patty Murray, is on finding a way to agree spending levels that would erase the prospect of yet another near-term budget standoff that could trigger another damaging government shutdown. One of the main potential obstacles could be demands from within the Democratic caucus that any deal include an extension of emergency unemployment benefits. As it stands, at the end of this year, some 1.3 million Americans will lose their unemployment benefits.

The issue is an important one, for although the recent non-farm payrolls evidence a strong rise in jobs, the labour market is far from recovered. Extending the benefits for a year would cost in the region of $25bn, something that could prove to be a sticking point between leaders on the two sides, who would have to shepherd any pact through the two houses of Congress.

Last week, the leader of the Democratic minority in the House, Nancy Pelosi, signalled her opposition to letting the benefits programme lapse when she said that “it would undermine who we are as a country”, although she has since moderated her remarks, suggesting an agreement could be on the way.

Fans of political theatre need not despair: even if an agreement is finalised this week and eventually steered through Congress, the emerging deal does not appear to have anything to say about the debt ceiling, which will come back on the agenda next spring.

Start your day with The Independent, sign up for daily news emails
Property
pets
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
News
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Sport
football
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
News
news
News
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk