Updated at 10:45 am,, 1:45 pm, 2:30and 2:41 pm EDT
This morning, the Congress of the United States has eight working days — including a weekend — to avert a “shutdown” of the federal government for lack of a resolution authorizing continuing spending.
The unintended consequences could be far greater than the intended consequences of the House Republicans forcing this showdown: They want to “defund” President Barack Obama’s signature health-care law with the budget resolution they’ve sent to the Senate, though Obama never would sign a bill that undoes “Obamacare” should the Senate ever approve it, which it won’t.
Even the shutdown that could result from this standoff will not result in any shutdown of Obamacare, as Bloomberg’s Heidi Przybyla and Alex Wayne report. Signup for the law’s new health-care exchanges is set to start Oct. 1, the same day the new fiscal year begins; a shutdown would suspend “non-essential” government services. Obamacare is largely financed with mandatory spending.
In addition, talk of a shutdown already is fueling speculation about another sell-off on Wall Street, a scare that could drive down the Dow by 1,000 points or more as investors cash in on the gains that have been made in the midst of the Federal Reserve’s attempts to bolster the economy. Bloomberg’s Mike Dorning has the story.
The American public, it appears, is growing more interested in the concept of compromising to get things done in Washington than the prospect of the insistence of principle resulting in stalemate. See the Gallup Poll’s findings, 2011 versus now, here at Political Capital.
It’s likely that Obama will meet with congressional leaders this week, as the deadline looms, according to Jay Carney, the White House press secretary, speaking with reporters today en route with the president to United Nations General Assembly meetings in New York. The budget resolution isn’t the last of this fight, however — Congress must confront another federal debt limit in late October or November. And Obama has maintained that raising the debt ceiling to cover the nation’s existing commitments is non-negotiable.
“Fiddling around” with the debt ceiling is “utterly irresponsible,” Carney said today, and the president will not negotiate the need to raise the $16.7-trillion ceiling “under any circumstances.”
“Congress needs to act responsibly in order to ensure that the government does not shut down,” Carney said. “Unfortunately, the House acted irresponsibly as an opening salvo in this engagement by passing a continuing resolution that has no chance of becoming law. And now we’ll have to see how this plays out. But the president has made clear his willingness to accept a short-term (continuing budget resolution) so that we can continue to have broader discussions about our fiscal challenges. But he’s made it abundantly clear that fiddling around with the prospect of default is utterly irresponsible and we cannot do it.”
The Senate has voted today to proceed to the budget resolution and expects votes on Wednesday.
Realists are counting on a budget compromise, yet there is no shortage of heated rhetoric: Senate Majority Leader Harry Reid of Nevada calling the Republicans behind the Obamacare dare “anarchists,” House Democratic Leader Nancy Pelosi of California called them “arsonists.”
“I call them legislative arsonists,” Pelosi said in an interview on CNN’s “State of the Union” Sunday, carving an exception for House Speaker John Boehner of Ohio. “They’re there to burn down what we should be building up in terms of investments and education and scientific research and all that it is that make our country great and competitive. I don’t paint them all with the same brush. And I certainly don’t paint the speaker with that brush. But enough of them in their caucus to shut down government. That would be a victory for them.”
Still, with eight days left in the budget year, prospects for a deal appear to be diminishing.
“We are in for another ugly confrontation,” Howard Ward, chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $40 billion, tells Dorning in today’s report. “Even though everyone knows the impasse will be short-lived, it is a sad reminder of how dysfunctional Washington has become. It will be a catalyst for taking profits after the recent run-up.”
Forty percent of global investors surveyed in a Sept. 10 Bloomberg poll said they would pull back on U.S. markets in the event of a government shutdown, which many economists say would be less damaging than a debt default.
“This is a sleeper issue right now, but it could really come to the fore,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. “There is a risk of the stock market selling off a thousand points over two or three days.” A protracted standoff on budget issues, even if a default or government shutdown is averted, could cut economic growth by a full percentage point in the fourth quarter, Rupkey forecasts.
If the stock market is roiled, Obamacare will not be.
In a quirk of the calendar, Przybyla and Wayne report, the start of enrollment for the Affordable Care Act and first day of a shutdown would fall on the same day, Oct. 1.
“A shutdown per se doesn’t stop the Affordable Care Act,” says Doug Holtz-Eakin, a former director of the Congressional Budget Office who now leads the American Action Forum, a Washington advocacy group opposed to the health law. That’s because the 2010 law relies primarily on mandatory spending, which congressional inaction can’t stop. It’s the budget category used for benefits such as Medicare and Social Security.
If some Republicans succeed in shutting down the government, opponents of the health-care law can’t rely on a closure to impede the ability of new insurance exchanges to link with other agencies. The exchanges must connect to computers at federal agencies including the Internal Revenue Service and Homeland Security Department in order to determine whether potential customers are eligible for coverage and for subsidies to help pay their premiums. Those connections probably wouldn’t be jeopardized by a shutdown, Holtz-Eakin says.
“None of these agencies will in their entirety shut down, and their computer infrastructure is a pretty essential thing,” he notes.
There is, of course, another option: Funding the government of a nation still struggling to recover from the worst recession since the Great Depression.
In this Washington, with eight work days left, the idea sounds quaint.
Bloomberg’s Phil Mattingly, traveling with the president, and BGov Congress Tracker team leader Kathy Rizzo contributed to this report.