Because it cannot resolve a domestic political argument about how to provide and pay for health services for its own people, the United States might soon default on its debts. This is shocking…..literally.
60% of US Treasury bonds are held by foreigners. The vast bulk of these are held by China and Japan. The idea that these bonds would not be honoured would undermine trust in the United States. A bond means, after all, a promise.
Military might is not much use if you gain the reputation of not keeping your promises.
The present stand off undermines the role of the dollar as a global reserve currency, at the very time when there is no other democratic entity able to provide an alternative reserve currency to step into the dollar’s place. The EU cannot yet fulfil that role because it has not yet remedied the structural defects in the euro (Banking Union, Eurobonds, mutual deposit guarantees, too big to fail etc.)
Gamesmanship is out of place at this stage. Collective leadership, including a willingness to put country before party, is needed in Washington.