Budget brinkmanship continues in USA

So who’s calling the shots? Congressional leaders in Washington must reach a deal on spending cuts by midnight on Friday. If they don’t – the entire federal Government shuts down – it’s funding for the coming fiscal year will simply run out.

Both sides are talking of progress – although they remain around $7 billion dollars apart – and President Obama, emerging from talks late last night, called the differences “relatively narrow” and said he was confident it could all be worked out. “It’s going to require a sufficient sense of urgency”, he added.

And there was a stark warning, that this was about more than a partisan row – a Government shutdown, Obama said, would have “ramifications all across this economy” if thousands of people were suddenly left without their weekly paychecks, or if crucial tax refunds could no longer be processed. “That could halt momentum right when we need to build it up – all because of politics”, he said. Other experts have warned it could even affect the fragile housing market – if there’s a sudden hiatus in handing out mortgage relief payments.

More immediately – a shutdown could leave America’s military forces without any pay, including troops on the front lines in Afghanistan and around Libya.

Political gamesmanship

But at heart – this is a classic piece of political gamesmanship: the House majority leader John Boehner is out to consolidate his leadership over an often fractious and unruly Republican party, while proving to the Tea Party rebels that he’s no pushover either. He’s got to show he’s doing his best to make substantial spending cuts, while not giving in to the more conservative wing, who want to slash the budget by $60bn.

There’s a lot at stake for Obama, too, as he powers up his re-election bid – it’s a test of his powers of leadership, his ability to stand above the bickering and forge a road to the wider good.

So today – it’s back to negotiations on Capitol Hill, behind closed doors – there’s talk of some kind of stopgap measure to push the deadline forward a week, but Democrats have already dismissed that idea as ‘bad politics’ and a deliberate attempt by the GOP to distract attention from their refusal to compromise.

Although Boehner has been talking of progress, he hasn’t been uniformly positive: “There is no agreement on a number and there’s no agreement on the policy matters.” And he accused President Obama of failing to lead.

Yet – there is hope that the worst-case won’t happen. The two sides might well be seven billion dollars apart, but although it sounds a lot, that’s a mere drop in the ocean of a total budget worth some $3.5 trillion. And Politico points out that the castlist is a quite different one from 1995, the last time there was a Government shutdown. The Democratic strategist James Carville says nothing in Boehner or Obama’s history suggests they relish a heated confrontation: these guys are pragamatists, rather than ideologues – they’re not exactly Newt Gingrich.

As the clock ticks on towards Friday’s deadline, both sides are insisting that no-one wants a shut down – or perhaps what they mean is that no-one wants the blame.

Felicity Spector is a chief sub-editor at Channel 4 News.