US federal government shutdown looms

Monday 30 September 2013 22.32
Any US government stoppage could reduce fourth-quarter economic growth by as much as 1.4 percentage point
Any US government stoppage could reduce fourth-quarter economic growth by as much as 1.4 percentage point

US President Barack Obama has said a government shutdown was entirely preventable.

Mr Obama accused Republicans in the House of Representatives of manufacturing a crisis that would hurt the US economy and US citizens.

"A shutdown will have a very real economic impact on real people right away," Mr Obama told reporters at the White House.

Mr Obama said his hope and expectation was that politicians would still do the right thing and prevent a shutdown.

He also said social security checks will still be sent out, US troops will remain on duty, but government office buildings will close during a shutdown.

House Republicans, led by Speaker John Boehner, want to delay Mr Obama's Affordable Care Act for a year and make other changes to the law.

Mr Obama earlier said he supported a Senate bill that would allow for a short-term funding of the government without cutting funding from his signature healthcare law.

Republicans and Democrats say they do not want to close the government, but neither side is budging from its positions.

Hanging in the balance are 800,000 federal workers who would be sent home if Congress fails to pass a stopgap spending bill before funding expires tonight.

Concern that a shutdown will stunt economic growth sent world stocks lower today, while crude oil traded near its lowest level in three months.

The fallout in US government services would be far-reaching: national parks and Internal Revenue Service call centres would probably 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 law, known as Obamacare, and that Democrats will not negotiate.

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 laid-off workers.

A brief government closure would not lead to any significant change of the Treasury Department’s forecast for when the US 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 17 October.

The US had 17 funding gaps from 1977 to 1996, based on a Congressional Research Service analysis.

In 1995 and 1996, interruptions lasted from 14 November to 19 November and from 16 December to 6 January, as Republicans led by House Speaker Newt Gingrich clashed over the budget with President Bill Clinton.