By: Janet Novack
October 1, 2013
The Federal government headed into its first partial shutdown in 17 years as Congress failed to pass any federal spending bills for fiscal 2014, which began at 12:00 A.M., Tuesday, Oct. 1. The shutdown follows days of rancorous finger-pointing and legislative ping-ponging between the Republican-controlled House and Democratic-controlled Senate—a spectacle that has driven Congress’ overall approval rating down to a record low 10% and President Barack Obama’s approval down to 44%, according to a new CNN/ORC International Poll.
The main obstacle to keeping the government open has been the insistence of the most conservative House “Tea Party” Republicans that even a six week budget stopgap bill (known as a continuing resolution) include some provision defunding or delaying all or part of the Affordable Care Act (a.k.a. ObamaCare), which they claim the vast majority of the public opposes. Obama and Senate Democrats, for their part, are adamant that no policy riders of any sort be attached to a temporary funding resolution and that ObamaCare is settled law–passed by Congress, upheld by the Supreme Court, and reaffirmed by Obama’s 2012 re-election. “One faction of one party, in one house of Congress, in one branch of government doesn’t get to shut down the entire government just to refight the results of an election,’’ Obama said during a visit to the White House briefing room Monday afternoon.
Shortly before midnight Monday, Office of Management & Budget Director Sylvia Burwell sent all department and agency heads a memo stating that since there was no “clear indication” that Congress would act in time for the President to sign a funding bill Tuesday, they “should now execute plans for an orderly shutdown.”
Assuming no wee hours surprise, about 800,000 federal civilian workers will be sent home Tuesday on unpaid furlough; all national parks and monuments (everything from Yosemite to the Statue of Liberty to the Smithsonian) will be closed; the Bureau of Labor Statistics will stop issuing its closely watched jobs numbers; the Small Business Administration will stop guaranteeing most new loans; the Internal Revenue Service will stop auditing and answering its phones (but taxpayers still must pay what they owe); and the Securities & Exchange Commission will stop reviewing registrations, including for IPOs, delaying the keenly awaiting offering from Twitter, among others.
But 1.4 million uniformed members of the military will stay on the job and will be paid, thanks to a last-minute bill unanimously passed by both houses and signed by Obama on Monday night. Another 1.2 million civilian federal workers involved in operations deemed necessary to protect life and property– air-traffic controllers, TSA airport inspectors, border control agents, FBI agents and prison guards, among others–will continue working, but won’t be paid until Congress passes FY 2014 funding.
The shutdown won’t affect Social Security and Medicare, which are “mandatory” programs funded outside the annual budget, or veterans health care, which is funded a year in advance. The Department of Veterans Affairs says October pension and disability payments to veterans will be made, but November checks could be endangered if the shutdown drags on. Ironically, the state individual insurance exchanges established under ObamaCare will open as scheduled on Oct. 1, although glitches can be expected regardless of what Congress does now.
It was unclear Monday night how long a shutdown might last or what impact it would have on the economy; stocks fell Monday, but not dramatically. Vanguard Group Chief Economist Joseph Davis estimated Monday that each week in which the government is shut down directly knocks one to two tenths of a percentage point off the economy’s growth rate. But the bigger issue, he said, is how much the turmoil raises the “Uncertainty Tax” on the U.S. economy. Policy uncertainty, Davis argues, is already keeping U.S. economic growth down around 2%, when it could be 3% a year.
Moreover, Congress hasn’t even started debating an increase in the nation’s federal borrowing limit, something the Treasury says must be done by about Oct. 17th if the U.S. is to continue to pay all of its existing obligations–including foreign creditors and Social Security recipients–in full. Even a short-lived default on the nation’s debt could prove far more harmful economically than a government shutdown. A summer 2011 debt limit standoff was resolved before the U.S. actually defaulted on paying its creditors, although the drama still led Standard & Poor’s to downgrade the U.S. credit rating for the first time in the nation’s history. Investors might interpret even a short shutdown this week as a harbinger of “a more contentious process” around raising the federal debt limit later this month, Davis observed. Already, House Republicans have compiled a wish list of policy changes–involving everything from tax reform to elimination of the Consumer Financial Consumer Financial Protection Bureau and more offshore drilling– they want in return for a debt limit increase.
The budget debate has hardly been reassuring. Last Friday, after Tea Party favorite Sen. Ted Cruz (R-Texas) staged a 21-hour talkathon against ObamaCare, the Senate voted 79 to 19 (with the majority of Republicans in support) to cut off debate on a House passed bill providing temporary funding to the government at current spending levels. That allowed Senate Democrats to strip out of the House bill a provision defunding ObamaCare and send a clean bill back to the House. But on Saturday, House Republicans added back a provision to delay ObamaCare for a year, which Senate Democrats rejected Monday afternoon.
Shortly before 9 P.M. Monday, House Republicans pushed through yet another anti- ObamaCare rider on a largely party-line 228 to 201 vote; this one would delay for a year ObamaCare’s requirement that everyone carry insurance or pay a penalty tax and would also deprive members of Congress and their staffs of the subsidy for health insurance other federal employees (and most employees of private companies) get. Instead, they would be forced to buy insurance on the individual exchanges, without any government subsidy. An hour later, the Senate voted to table (in effect reject) that version too, on a 54-46 party-line vote, putting the issue back in the House’s court.
As midnight passed, the House debated a new Republican effort to send a bill with the latest ObamaCare restrictions to a conference committee with the Senate. Senate Majority Leader Harry Reid (D-Nev) had already made clear that he wouldn’t negotiate over the budget until the ObamaCare provision was removed. “We will not go to conference with a gun to our heads,” he said on the Senate floor before adjourning that body for the night. But House Republicans went ahead and passed their conference committee play anyway, allowing House Speaker John Boehner (R-OH) to Tweet after 1 A.M. that “Senate Democrats chose to shut down the govt rather than discuss the failures of #Obamacare.”
“The Democrats are not negotiating. They’re not compromising. I think Harry Reid wants a shutdown,’’ Cruz complained to CNN. “The leadership of the House is stuck between these fanatical right wingers and what they know is right for not only the country but the future of their party,’’ Sen. Chuck Schumer (D-NY) told MSNBC. “God forbid we shut down the government, there’s going to be such a huge reaction they’ll have to back off in a few days” he added. Surveys show a large majority of voters, whatever their qualms about ObamaCare, oppose shutting down the government in a bid to defund or change it.
How the budget standoff might be resolved is still unclear. Rep. Peter King (R-NY) told reporters Monday that as many as two dozen House Republican moderates were ready to vote with House Democrats to pass a clean continuing budget resolution—if given a chance to do so by Boehner. The last federal shutdown, when President Bill Clinton and then-House Speaker Newt Gingrich (R-GA), locked horns, lasted for a total of 28 days over two acts—the first in November 1995 and the second from mid-December to early January of 1996.