Source: Bloomberg – First U.S. Shutdown in 17 Years Imminent With No Talks
The U.S. government stands poised for its first partial shutdown in 17 years at midnight tonight, after a weekend with no signs of negotiations or compromise from either the House or Senate to avert it.
Republicans and Democrats in Congress say they don’t want to close the government, though neither side is budging from their positions to avoid it. House Republicans, led by Speaker John Boehner of Ohio, want to delay President Barack Obama’s Affordable Care Act for a year and make other changes to the health-care law. Democrats vow not to let that happen.
Hanging in the balance are 800,000 federal workers who would be sent home tomorrow if Congress fails to pass a stopgap spending bill before funding expires tonight. Standard & Poor’s 500 Index futures slid and Asian stocks retreated on concern of a shutdown, while Treasuries advanced.
“I’m afraid, based on what Speaker Boehner has said so far, that we are going to look at a shutdown,” Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said today on Bloomberg Television.
The fallout would be far-reaching: national parks and Internal Revenue Service call centers probably would close. Those wanting to renew passports would have to wait and the backlog of veterans’ disability claims could increase.
The political implications are much less clear. Democrats are painting Republicans as obstructionists who are trying to undo a law passed by Congress and upheld by the Supreme Court. Republicans say they are trying to save Americans from the effects of Obamacare and that Democrats won’t negotiate.
A Bloomberg National poll conducted Sept. 20-23 shows Americans narrowly blame Republicans for what’s gone wrong in Washington, just as they did when the government closed in 1995 and 1996 — two of the 17 times U.S. funding stopped since 1977. A CNN/ORC International poll conducted Sept. 27-29 and released today said that 46 percent of respondents would blame congressional Republicans for a shutdown, while 36 percent would say the president was responsible.
The Senate convenes at 2 p.m. today and is set to reject the House’s latest plan to delay Obamacare and repeal a tax on medical devices, and send back a temporary spending measure.
In a government shutdown, essential operations and programs with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments.
A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers.
A brief government closure won’t lead to any significant change of the Treasury Department’s forecast for when the U.S. will breach the debt limit, a Treasury spokeswoman said yesterday in an e-mail. The Treasury has said measures to avoid breaching the debt ceiling will be exhausted on Oct. 17.
Greg Valliere, chief political analyst for Potomac Research Group Holdings in Washington, told Bloomberg Television today that “a shutdown is not the issue” because default more important.
“If we even talk about default, if we come within a day or two of default, that’s a terribly negative story for the overall economy,” he said.
Adding up a looming government shutdown and the potential for a default is “massive uncertainty for at least another month, and markets don’t like uncertainty,” he said.
Treasuries “are a safe haven, for now,” but even bonds “could start to become suspect if we get into mid-October with a possible debt-ceiling crisis,” Valliere said.