US fiscal deadlock is a vital lesson for the UK Over the summer, the entire narrative of British politics has shifted. The Westminster village now assumes a UK recovery is "in the bag" - which, for the most part, boosts the Tories. This strikes me as both misguided and astonishingly complacent. The Chancellor has lately come close to spotting the green shots of an economic upswing, hailing "tentative signs of a balanced, broad-based and sustainable recovery." As a British citizen, and an economist sick of writing gloomy commentaries, I so want that to be true. Yet the data are extremely patchy and, for those willing to look, some very large storm clouds are on the horizon. And, when all is said and done, I'd rather be gloomy than wrong. Just last week, even though the Office for National Statistics left overall second- quarter GDP growth unrevised at 0.7pc, the fine print was disturbing. While household spending was up 0.3pc, business investment - the underlying fuel of commerce, and a key indicator for future growth - was revised down sharply, registering a shocking 2.7pc decline. The UK economy is still 3.3pc smaller than it was five years ago, at the time of the Lehman Brothers collapse. This remains the weakest recovery in recorded British history. And now, along with the suppressed angst about unwinding so-called quantitative easing, both here and in the US, we need to consider another looming reality. In recent days, the mood music from the States has been quite cheerful. Certainly, the deal between the US and Russia on the United Nations Security Council, several weeks in the making, has been widely and rightly welcomed as an outbreak of common sense that should not only make further Middle Eastern conflict less likely but also help to boost global investor confidence. Perhaps this focus on geo-politics, together with our party conferences, is one reason so little attention has been given to what's happening in Washington - and the impact it could have. A ferocious row is brewing between the Senate, where the Democrats have a majority, and the Republican-controlled House of Representatives. Yes, I know we've been here before - and such spats have fizzled out. But this one may be different. Fiscal brinkmanship seems to have been written into the American constitution in recent decades. Since the early 1980s, the US "debt-ceiling" has been raised no fewer than 42 times, with the limit ballooning from $1,390bn to $16,600bn. The US national debt is up a staggering 85pc since 2008 - when Obama took office. That's why debt-limit disputes, and budget debates more generally, have become so heated and partisan. Back in the summer of 2011, the debt-limit stand-off was resolved by forcing the president to raise the ceiling in three stages, with the latter two subject to Congressional votes. In February 2013, there were more shenanigans, as Congress suspended the debt limit for three-and-a-half months, adopting so-called "extraordinary measures" to raise it retrospectively. That's what produced the $16,700bn ceiling now in place - and which the US Treasury Secretary, Jacob Lew, says will be breached on October 17. Unless a deal is done over the coming weeks, then the US could be forced into a sovereign default, causing havoc on international markets. Faith in the world's most widely held financial asset would be hammered, and interest rates would spike as global equities nose-dived. While few believe that will happen, previous US fiscal showdowns have sparked serious financial volatility and, two years ago, cost America its triple-A credit rating, as the world's largest economy was downgraded for the first time. All the signs are that this budget clash will be even worse - not least as the language is so bitter. The first flashpoint will be tomorrow. Monday night is the deadline for Congress to agree an annual "spending bill," or budget. For the first time, the Republicans are going all out for "Obamacare," the Democrat's flagship health reform that many of the president's opponents view as ideologically objectionable and ruinously expensive. The White House, in contrast, sees health reform as sacrosanct, having passed enabling laws in 2010, upheld by the Supreme Court two years later. Obama then regained the White House last year, with health care at the heart of his election message as his party kept control of the Senate. Republicans retort that they held their share of votes in the House, and did so while extolling the virtues of low tax and low spending. So, there is "no mandate" for higher taxes and more borrowing, many of them say. Egged on by the Tea Party - written off by many mainstream analysts, a judgment they're now rapidly revising - a core group of Republican lawmakers are insisting they'll pass a new budget on Monday only if Obamacare is "de-funded." While financial markets may remain sanguine if budget negotiations fail over the next 24 hours, and the US government endures a temporary "shutdown," they may not. And a mid-October debt-ceiling debacle would most certainly turn markets upside down. The Republicans' requirements for that go way beyond Obamacare, including demands for completion of the Keystone oil pipeline from Canada to the Gulf of Mexico, various offshore oil and gas production permits and the scrapping of other Democrat shibboleths related to environmental protection and consumer rights. To be sure, the atmosphere in Washington is tense. When asked if he would ever abandon this fiscal struggle, Republican House Speaker John Boehner said: "I do not see that happening." The president, meanwhile, is spitting tacks. "No Congress before this one has ever, ever in history, been irresponsible enough to threaten an economic shutdown, to threaten default," Obama said, "just to try to blackmail a president into giving them some concessions on issues that have nothing to do with the budget." America's fiscal row, which has already delayed Fed tapering, could yet derail the broader global recovery, so up-ending British politics. As the Tories survey the electoral landscape, they should keep that reality in mind.