1 Oct 2013

US government shuts its doors – so what next?

Closed for business: 800,000 federal workers are sent home without pay as Republicans and Democrats fail to agree a budget. So what happens next? Crisis – or compromise?

negotiations ahead of shutdown (getty)

“This perpetual cycle of brinkmanship and crisis has to end once and for all”, President Obama told NPR, as the first government shutdown for almost two decades began to take hold. But the limits of his authority are all too clear, faced with a hardline Republican party that’s refusing to give up its fight.

More than 800,000 federal employees, from cafeteria workers to Pentagon staff, have been sent home without pay. National parks are off limits, museums have closed their doors, and the National Zoo’s popular live Panda Cam has gone dark.

The economic impact is already being felt: stock markets around the world have tumbled, while the US chamber of commerce gathered 250 industry groups in a letter urging a quick resolution to the impasse.

“It is not in the best interest of the employers, employees, or the American people to risk a government shutdown that will be economically disruptive and create even more uncertainties for the US economy”, it warned.

But as the clock ticked inexorably towards midnight, the two parties remained as entrenched as ever. The senate majority leader Harry Reid branded his opponents the ‘banana Republicans’: to the conservatives, this was their big chance to frustrate a law they detest: Obamacare.

We can recover from a political squabble, but we can never recover from Obamacare. Steve King, Rep, Iowa

“We can recover from a political squabble”, declared one of the most conservative of all, Iowa’s Steve King: “but we can never recover from Obamacare”. This is, essentially, the Republican party trying to rewrite a law that has been in place for three years, when they don’t have enough votes to repeal it.

But here’s the thing. Obama’s flagship healthcare reforms have been approved by the House, the Senate and the Supreme Court: they have been through a general election.

Today the first plank of that law began to roll out – the new insurance marketplace which will provide subsidised healthcare for millions of uninsured. “That funding is already in place”, the president reminded his critics last night: “You can’t shut it down”.

But it didn’t stop them trying, to the frustration of moderate Republicans who denounced their colleagues as “lemmings with suicide vests” who were leading the country into a dead end.

Divided we stand

For the Democrats, the principle at stake is just as important. Senate budget chair Patty Murray declared “we won’t negotiate while Republicans are threatening families and the economy with a crisis”.

And so, the closure begins, or a partial one at least: with this stern note from the Office of Management and Budget. “Agencies should now execute plans for an orderly shutdown due to the absence of appropriations”.

Everyone deemed “essential” will be staying at work, although those who did get furlough notices might take some crumbs of comfort with the offer of a free cupcake from a leading DC bakery chain.

The last time this all happened, in 1995-96 there were two separate shutdowns, lasting 21 days. Newt Gingrich led the Republican confrontation against Bill Clinton’s tax and spending plans, demanding cuts in Medicare and a balanced budget agreement.

18 days into the second shutdown it was leading Republican Bob Dole who brought matters to a head, declaring on the Senate floor that enough was enough. The GOP and the president reached a compromise, although the whole chaotic episode ended up costing the economy some $1.4bn.

Republicans pay the price?

It ended up costing the Republicans dear as well: the public overwhelmingly blamed them for the whole sorry episode, while Clinton saw his ratings start to climb.

This time, the row between the parties is far more political, and far less open to negotiation, and while Pew research found public opinion on who to blame was fairly evenly divided, latest surveys have bad news for the Republicans.

A Quinnipiac University survey shows a huge majority don’t want a shutdown, and although Obamacare is by no means popular, most people don’t want to see Congress cutting off its funding. As for the GOP – a massive 74 per cent disapprove of the Congressional party, with approvals showing their lowest ever score.

As for cost, that too is harder to gauge. Economists predict that a partial shutdown lasting two to three weeks could shave up to 0.4 per cent off the rate of economic growth, an unwelcome prospect for an economy already struggling to grow.

In the mid-90s. the economy quickly bounced back, making up for its losses and more. Today, the picture is not nearly so robust – and the fear is that all this is simply a rehearsal for a far more damaging protracted fight over the debt ceiling.

That all comes to a head on October 17th when Congress must agree to raise the nation’s borrowing limit or leave it unable to pay its bills. In 2011 when the deadline threatened to expire the stock market crashed by 14 percent, and the US was hit by its first credit downgrade in history.

You don’t get to extract a ransom for doing your job. President Obama

This is surely not the second term that Obama imagined when he won re-election just a few months ago. And it is not the political lesson about retreating from extremism which the Republicans seemed to take on board, as they licked the wounds of that electoral defeat.

So what next? Don’t expect any clarity from House Republicans, who have yet to decide whether to propose another conference committee meeting to thrash out some kind of compromise.

While moderates like New York congressman Peter King wring their hands over what they call a “fool’s errand”, the conservatives are convinced they will win the public war.

“The country is unified behind the idea we should do everything in our power to delay, defund, stop, repeal Obamacare”, declared Texas Rep John Culberson.

Senate Democrats are just as united. Nothing will induce them to rewrite or revoke a law that has been democratically approved: for if every debt ceiling fight is turned into a scramble to rewrite unpopular laws, where will it all end?

“You don’t get to extract a ransom for doing your job”, President Obama declared as the clock passed midnight. Welcome to the new normal.

Felicity Spector writes about US politics for Channel 4 News