US showdown laced with dangerous unknowns

Republican John Boehner says he may not allow Congress to raise the US government's borrowing limit. Source: AAP

SURELY, America's bickering politicians are not so crazed by partisan fervour that they would let the still recovering economy plunge into the catastrophic unknown of the country's first-ever debt default?

Or are they?

Congress has sometimes been reluctant to lift the US statutory borrowing limit - as it must do again by October 17 - and only done so after a close vote. But it has never caused a major incident.

But this routine duty has, in recent years, become another battleground in the bitter fight between President Barack Obama and his Republican foes in the House of Representatives.

So far, the horrific potential consequences of not raising the debt ceiling - leaving Uncle Sam with no cash to pay his bills, triggering a likely US recession and possible global economic contagion - have forced debt hawk conservatives to go along.

But in shutdown Washington, with Obama and Republicans deadlocked, conventional wisdom is being tested as never before.

The administration accuses the Republican Tea Party faction of "playing with fire" over its demand that Obama make concessions - for example delaying his health care law - in return for the raising of the current $US16.7 trillion debt ceiling.

With America just nine days away from the start of a possible default on its obligations, Obama and Republican House Speaker John Boehner are dug in deep.

Relations between America's two most powerful politicians are so laced with distrust that neither seems inclined to give the other a face-saving way out.

Obama stood firm Monday, ruling out any talks on budget issues, health care or anything else, until Boehner reopens the federal government, now shuttered for a week over a budget impasse, and raises the debt ceiling.

"What we're not willing to do is to create a permanent pattern in which, unless you get your way the government's shut down or America defaults," he said.

"That's not how we do business in this country, and we're not going to start now."

Boehner hardened his own line, spinning comments by White House aide Gene Sperling to claim the president preferred default to dialogue.

"A senior White House official said that the president would rather default than sit down and negotiate. Really?" Boehner said.

With both sides ripping chunks from each other, the situation seems ripe for miscalculation.

Some Republicans seem set on the notion that Obama, decried by some Democrats as quick to climb down in first term standoffs, will blink, rather than see his legacy sullied by a new recession.

But this time seems to be different. The president, who will never face voters again, is flexing a-devil-may-care streak.

Will he give way?

No way, say White House aides, privately insisting Boehner will get no off-ramp.

The creeping sense of danger from this deeply personal standoff has not yet been widely recognised outside Washington.

But one key player is alarmed. China, which leads the list of nations invested deep in the supposed safety of US Treasury Bonds, cleared its throat on Monday.

"The clock is ticking," said Chinese vice finance minister Zhu Guangyao.

Tim Pawlenty, briefly a Republican presidential candidate, who now heads the Financial Services Roundtable, told CNN the potential remained for potentially "cataclysmic" circumstances.

"They are so dug in, there's a chance they could stumble into default. We don't want that," he said.

Billionaire investor Warren Buffett has also seen enough.

"(Debt ceiling brinkmanship) ought to be banned as a weapon," he told Fortune Magazine. "It should be like nuclear bombs, basically too horrible to use."

Democrats may be comforting themselves that Republicans will take more of a hit from a continued government shutdown and even a default than they will.

Thirty-eight per cent of Americans in a Pew Research Poll Monday said Republicans were to blame for the government shutdown, while 30 per cent blamed the Obama administration.

Asked on ABC News Sunday whether the economy was headed for default, Boehner replied: "That's the path we are on."

The depth of Boehner's plight is revealed by the fact that some Republicans believe a debt default is not even a bad outcome - though it would involve not paying already accrued US debt, rather than cutting spending to mitigate future borrowing.

"I think, personally, it would bring stability to the world markets," since they would be assured that the United States had moved decisively to curb its debt, Florida freshman Republican congressman Ted Yoho was quoted as saying by the Washington Post.

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