Governments are living in a fiscal fantasyland

Wrangling over budgets is always part of politics, but today’s fiscal brinkmanship is truly frightening. In America Democrats and Republicans are playing a game of chicken over raising the government’s debt ceiling. As the drama intensifies, the stakes are getting dangerously high. Janet Yellen, the treasury secretary, says her department could run out of cash to pay the government’s bills on June 1st if no deal is struck. Investors are beginning to price in the risk of what would be America’s first-ever sovereign default.