US govt shuts down

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The U.S. Congress. Photo courtesy of modmyi.com
The U.S. Congress. Photo courtesy of modmyi.com

WASHINGTON, 1Oct2013 (PNA/Xinhua) – Congress’s failure to agree on a funding bill has pushed the U.S. government into a partial shutdown for the first time in 17 years, hitting many public services and forcing many federal employees onto unpaid furloughs.

NO LAST-DITCH COMPROMISE

After weeks of congressional back-and-forth, the Democratic-controlled Senate and the Republican-led House failed to strike a deal by Sept. 30 to avert a government shutdown.

In a late-night final clash over the funding bill, called the continuing resolution, the Senate killed the latest House measure, which was intended to tie funding of the government to a delay in part of Obamacare, or the Affordable Care Act, kicking the bill back to the House and pushing the government toward a shutdown.

The anti-Obamacare amendments insisted on by the Republicans proved to be a non-starter in the Senate, and the Democrats’ demand of a “clean” funding bill was ignored.

The last time the government shut down was in 1996 during budget standoffs between the Clinton administration and a Republican Congress.

An 11th-hour deal has become common in Washington in recent years with the passage of spending bills being paralyzed by political brinkmanship. Lawmakers have regularly run against deadlines to broker deals on taxes and spendings.

In an unscheduled statement on Monday afternoon, President Barack Obama blamed the Republicans for embracing the conservatives’ strategy to derail Obamacare and warned of economic fallout of the shutdown.

“A shutdown will have a very real economic impact on real people, right away,” Obama told reporters. “Past shutdowns have disrupted the economy significantly. This one will, too.”

Obama later called House Speaker John Boehner and other party leaders in the House and Senate, but there was no breakthrough. On Capitol Hill, members of both parties said they wanted to avoid the shutdown, but they continued to maneuver for political position and squabble over who was to blame.

TEST FOR ECONOMIC RESILIENCE

The White House Office of Management and Budget late Monday ordered federal agencies to begin their plans for “an orderly” government shutdown. U.S. federal agencies have to identify essential personnel and determine which operations will continue. Essential public services ranging from postal services to national security will continue. National parks and museums will be closed.

According to the American Federation of Government Employees, between 800,000 and one million federal employees will be affected, with some staying home on unpaid furlough until a compromise is reached. The White House has said about three-fourths of White House staffers would face furloughs.

Mark Zandi, chief economist at Moody’s Analytics, estimated a three-to-four week shutdown would cut growth by 1.4 percentage points. He projected a 2.5-percent annualized pace of fourth-quarter growth without a shutdown.

A government shutdown could also have wide-ranging implications for the markets. U.S. stocks ended lower Monday as the shutdown threat loomed. The Dow Jones industrial average fell about 0.8 percent. The Standard & Poor’s 500 Index dipped about 0.6 percent and the Nasdaq fell about 0.3 percent.

Analysts said, if a deal was reached quickly, markets would recover, but a prolonged shutdown could harm the economy and consumer confidence.

DANGERS BEYOND SHUTDOWN

The funding bill fight may only be a prelude to the even more momentous fiscal fight on the government’s borrowing limit. Even if Congress and the White House resolve the standoff and bring the government back into normal operation, their divergence over fiscal issues is likely to grow as the nation approaches the debt ceiling in mid-October.

Treasury Secretary Jacob Lew has warned that a debt limit agreement needs to be reached no later than Oct. 17. Lawmakers will then have to come together to agree to raise the nation’s US$ 16.7-trillion debt ceiling or risk defaulting on its payment obligations.

“A government shutdown is not the end of the world. It’s just a bad way to run a government,” said Isabel Sawhill, a senior fellow with the Brookings Institution.

“A default, on the other hand, could cause a financial crisis, even a depression,” she added.

In a speech Friday, former vice president Al Gore said Congressional Republicans were engaging in “political terrorism” in holding hostage government funding and the debt ceiling.

If a shutdown drags on longer than a couple of days, stretching to the Oct. 17 deadline for raising the debt limit, it could be far more damaging and would send shock waves around the world. (PNA/Xinhua)

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