Washington: The US government began a partial shutdown at midnight for the first time in 17 years, putting as many as 800,000 federal employees out of work on Tuesday, closing national parks and halting some government services after Congress failed to break a partisan deadlock.
No further negotiations were immediately planned, raising concerns among some lawmakers that the shutdown could bleed into a fight economists consider even more consequential: how to raise the nation’s debt limit to avoid a first-ever default after 17 October.
Chances of a last-minute deal—seen so often in past fiscal fights—evaporated shortly before midnight as the House stood firm on its call to delay major parts of President Barack Obama’s healthcare law for a year. Senate Democrats were equally firm in refusing.
“This is all a subterfuge to satisfy the Tea Party-driven Republicans and this very, very strange agenda that is so hurtful to the American people,” senate majority leader Harry Reid said on the Senate floor shortly after 11 pm, referring to the House’s plan to appoint budget negotiators.
Earlier in the night, House speaker John Boehner called on Senate Democrats to come to the negotiating table.
“This is not about me,” the Ohio Republican said on the House floor. “And it’s not about Republicans here in Congress. It’s about fairness for the American people.”
A partial federal government shutdown would cost the US at least $300 million a day in lost economic output at the start, according to IHS Inc. That’s a fraction of the country’s $15.7 trillion economy, and the impact is likely to grow over time as skittish consumers and businesses stay on the sidelines.
Extract ‘ransom’
“You don’t get to extract a ransom for doing your job, for doing what you’re supposed to be doing anyway or just because there’s a law there you don’t like,” Obama said at the White House on Monday. “Time’s running out.”
Amid concern that a shutdown would stunt economic growth, stocks traded lower, trimming the biggest quarterly gain since the start of 2012, and the yield on 10-year Treasury notes traded at an almost seven-week low.
The Standard and Poor’s 500 fell 0.6% to 1,681.55 at 4:19 pm in New York on Monday. All 10 main industries in the S&P 500 dropped, with consumer goods, oil and gas and financial shares falling the most.
During the partial government shutdown, many essential government operations would cease. Internal Revenue Service call centers would close and more than 90% of Environmental Protection Agency workers would stay home. National parks and museums would be shuttered.
Other services
Other services continue uninterrupted. Social Security and Medicare benefits would be paid. US troops would remain at their posts around the world and would get paid under a bill Obama signed on Monday. Air traffic controllers and airport security screeners would keep working.
The shutdown comes on the first day of enrollment in the exchanges mandated under Obama’s Affordable Care Act, itself at the heart of the fight. Enrollment will continue today despite the shutdown, because it is paid for out of mandatory funding not covered in a shutdown, US officials said.
In the end, the final hours before the shutdown occurred were marked with a combination of legislative procedure and partisan vitriol. House Republicans said they would appoint members to a committee meant to negotiate a compromise between the Republican and Democratic positions—something weeks of votes failed to accomplish.
Before midnight, the US Office of Management and Budget issued guidance to agencies, telling them how to go forward when money ran out at midnight.
Delaying Obamacare
Boehner, who said he did not want a shutdown, kept bringing bills backed by hard-liners in his party to the floor for votes. Twice yesterday, the House voted to send a bill delaying Obamacare to the Senate. Twice, the Senate rejected the House’s plans.
Republicans remained divided between a group that says the party’s confrontational strategy is doomed and a faction railing against Obama’s refusal to negotiate.
“I would like see some road in which Barack Obama is actually participating in the process,” said Representative Tim Huelskamp, a Kansas Republican.
Debt ceiling
Congress and Obama have been at loggerheads on fiscal policy since Republicans won control of the House. They took several disputes to the brink, including a potential government shutdown in April 2011, the debt ceiling in August 2011 and the expiration of tax cuts in December 2012.
In each case, lawmakers reached an agreement to prevent the worst possible outcome. Most recently, the House passed a tax bill 1 January, hours after income tax rate increases took effect.
Boehner and majority leader Eric Cantor tried to avoid this fight, offering a first proposal last month that would have let the Senate send a spending bill without conditions right to Obama.
They faced an uprising from Republicans, urged on by senator Ted Cruz of Texas, who insisted on language that would defund Obamacare.
The House scaled back its demands twice, each time running into a party-line blockage from Senate Democrats and Obama, who increasingly saw the spending bill as a prelude to the debt- ceiling negotiations.
‘Can’t continue’
“These Tea Party people are insatiable when it comes to confrontation and shutting down the government,” said senator Richard Durbin of Illinois the second-ranking Democrat. “This has got to come to an end. We can’t continue to lurch from one crisis to another.”
The House’s latest volley, passed on Monday evening, would delay for one year the mandate that individuals purchase health insurance and would end government contributions to the health insurance of lawmakers, congressional staff members and political appointees.
Democrats see a quick path out of this crisis. They want Boehner to allow the House to vote on the Senate’s version, which would extend government funding through 15 November and exclude any Obamacare conditions.
Republicans said they want to force Obama to accept some concessions on his signature health care law.
Political fallout
Some strategists expect the shutdown to drive both parties deeper into their respective fighting corners as they assess the economic and political fallout, hardening positions at least temporarily before any resolution can be reached.
“It’s clear that there are rising concerns within the House Republican caucus about how all of this is being handled, but I believe that for right now, the insurgents have the upper hand and they’re not going to go away without a fight, said Democratic communications consultant Jim Manley of Washington- based Quinn Gillespie and Associates LLC, a former top aide to Senate Majority leader Harry Reid of Nevada.
Nor do Democrats have any interest in compromising with Republicans as long as their internal fighting about what strategy to pursue subsides.
At the same time, many Republicans have come to believe that shuttering the government for a brief time is a prerequisite for any deal.
“It would be better for Republicans if there were no shutdown, but in many ways it can be a useful way to lance the boil, before the bigger fight to come over raising the debt ceiling,” said Republican strategist John Feehery, also of Quinn Gillespie, who served as a top aide to former House speaker Dennis Hastert of Illinois.
“The debt limit is much more important, and hopefully the shutdown can release some of the pressure and helps them get to a broader agreement,” Feehery said. “But that remains to be seen.”
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