Perhaps investors are becoming inured to the United States' annual debt-ceiling debacle, now playing out for the third year in a row. But as the short-term antics become more routine, the risks of long-term dysfunction become more apparent — a point underscored by the shutdown of the federal government.
U.S. President Barack Obama is right to complain of blackmail. Congress cannot expect to use the threat of default — that is, a weapon of mass financial destruction — as a normal means of extracting concessions. Unfortunately, because Obama himself has established a history of making concessions in the face of congressional brinkmanship, the debt-ceiling debate has morphed into more than just a short-term political fight.
Increasingly, the battle over the U.S. government's debt ceiling reflects a deeper constitutional power struggle between the president and Congress. This struggle, if left unresolved, could profoundly weaken the government's ability to make significant economic decisions in the future.