The big American budget bust-up is over ... for now

The passing of a last-gasp bill by the US Congress to end the partial Government shutdown and raise the federal debt limit may look like a political get out of jail card for President Barack Obama and his country's economy but, in reality, it is not as simple as that.

To begin with, under the deal struck, the debt ceiling raise will only last until February 7 next year. While the US Government will reopen for the moment it will only be funded through until January 15, 2014.

In other words, three months down the line we could be looking at a rerun of the crises that have gripped the US economy and closed its Government departments for 16 long, anxious days.

If there is one positive long-term aspect to the latest deal, it is the built-in provision of an agreement to appoint a cross-party committee of legislators whose job it will be to negotiate future spending levels.

In other words, these are the guys that will - theoretically - sort out future differences to help prevent the US from once again finding itself standing on the edge of the economic abyss.

How close the world's largest economy was from toppling into that abyss could be measured yesterday by the relief felt not just in Washington but across the globe, where many economies depend so much on US consumers.

From Beijing to Brussels, they welcomed the deal. Christine Lagarde, managing director of the International Monetary Fund (IMF) was slightly understating things when she called the breakthrough in the crisis important and necessary.

Where Ms Lagarde and the IMF were more forthright, however, was in their insistence that Washington should get a grip on its long-term finances.

She pointed out: "It will be ­essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner."

The impasse and shutdown, fought over government spending in general and Mr Obama's new healthcare programme in particular, is estimated to have taken a £15 billion toll on the US economy.

Almost as significant though was the way the political bickering and brinkmanship that accompanied it provided an unedifying display that has at times been deeply embarrassing for Mr Obama's administration.

"The spectacle presented in Washington over the last few weeks goes beyond the excessive taste of the Americans for political drama," was how Philippe Gelie writing in France's Le Figaro newspaper summed it up.

In the midst of all this political rancour, it was ordinary Americans, of course, who bore the brunt of the standoff.

Initially, some 700,000 of the 2.1 million-strong federal workforce were told to stay home but it was not just government employees who stopped working.

Defence contractor Lockheed Martin said it would put 3000 employees on unpaid leave and United Technologies said it would temporarily lay off 2000 workers.

On a wider level, most national parks, museums, federal buildings and services closed. Even pension and veterans' benefit cheques were delayed and death benefits paid to the families of soldiers recently killed abroad were initially suspended, only to be restored after a public outcry in a nation fiercely supportive of its serving military personnel.

So how did it all come to this? The simple fact is Washington is engaged in a war of political ­attrition and the battlelines have hardened over the past half decade.

This battle has not just been between Republicans and ­Democrats but an increasingly vicious civil war within the GOP between the Tea Party and what remains of the responsible centre-right.

In a satirical piece written for the influential US-based Foreign Policy magazine, Rosa Brooks, a law professor at Georgetown University and a senior fellow at the New America Foundation, flagged up the very different role of today's Tea Party to that of its centuries-old predecessor.

She commented: "It's pretty ironic when you think about it. In 1773, the Tea Party protesters were trying to free America from what they saw as rule by unelected foreigners.

"In 2013, the new Tea Party wanted to put a stop to a government run by their own fellow citizens."

Certainly, the damage all this has done to the Republicans is now tangible. In the latest set of US polls - most notably from Gallup and NBC/Wall Street Journal - it is clear the Republicans are getting the lion's share of the blame for the current division and dysfunction.

Seven in 10 Americans now say the GOP are "putting politics ahead of their country", while figures indicate the Republican Party now has the lowest popular approval rating of any political party in the history of polling.

Given this evidence, it is hardly surprising many corporate ­executives and economists have now come to the conclusion the biggest threat to the US economy may be its own elected representatives.

Admittedly, all these down-to-the-wire budget and debt crises, the indiscriminate spending cuts and Government shutdowns have so far not been enough to push the US economy back into recession.

But that said, economic ­observers have a point when they highlight that, over the last few years, Washington's policy ­blunders have significantly slowed economic growth and kept roughly two million people out of work.

In the midst of all this stands President Obama. Thanking the Senate for passing the bill that helped avoid the debt default crisis, he insisted yesterday the country's politicians and legislators had to get out of the habit of "governing by crisis".

He observed: "My hope and expectation is everybody has learned there's no reason why we can't work on the issues at hand, why we can't disagree between the parties without still being ­agreeable and make sure we're not inflicting harm on the ­American people when we do have disagreements."

If there is such a thing as ­political winners and losers in the recent crisis, Mr Obama has come out on top. Throughout the crisis, he kept his nerve, vowing not to negotiate with a Republican gun to his head.

His second term as president has had its ups and down, not least created by his indecision over the question of intervention in Syria. Suddenly, though, having emerged from this standoff, his presidency has new possibilities.

His critics - as one did recently on Fox News - may say that "watching Mr Obama govern is like watching a distracted man flipping through TV channels and all of it bad". The fact is, though, he still has three years left in the White House and the opportunity to leave behind a meaningful legacy.

For the moment the Republicans are in disarray but they will regroup and choose another day to challenge Mr Obama. Yesterday, the US federal government began to creak back into action for the first time in more than two weeks.

"We'll begin reopening our government immediately and we can begin to lift this cloud of uncertainty from our businesses and the American people," Mr Obama insisted when he took to the podium in the White House briefing room as the crisis moved towards a resolution.

As I said, the big American budget bust up is over... for the moment.