US govt nears shutdown as parties reject each others’ plans

Washington: Both parties in the deadlocked Congress offered last-minute proposals that the other has already rejected as the US government heads toward its first partial shutdown in 17 years.

add_main_imageThe Senate voted 54-46 to reject the House’s latest plan, in a move that puts the pressure back on House Republicans, who began meeting at 2 pm in the Capitol basement.

“With a bully, you can’t let them slap you around,” said Senate majority leader Harry Reid, a Democrat. “Because if they slap you around today, they’ll slap you around five or six times tomorrow.”NextMAds

Senate Republicans floated the idea of a one-week extension to the funding deadline, to avert a shutdown. Reid said no.

“House Republican leaders are planning another volley today that Reid has already rejected. The proposal would include a delay of the individual mandate to buy health insurance and eliminate government contributions to the health coverage of lawmakers and congressional staff,” said Representative Bill Shuster, a Pennsylvania Republican.

Congress, which has stumbled to fiscal deadlines repeatedly in the past three years, could still find an 11th-hour compromise. Lawmakers didn’t sound optimistic about when or how they could reach an agreement and few if any negotiations were occurring.

“I don’t even know how to guess,” said Representative James Lankford of Oklahoma, chairman of the Republican Policy Committee.

Stocks Fall

Concern that a shutdown would stunt economic growth sent stocks lower, trimming the biggest quarterly gain since the start of 2012, and the yield on 10-year treasury notes traded at an almost seven-week low.sixthMAds

The Standard & Poor’s 500 fell 0.6% to 1,680.90 at 3:25 pm in New York. All 10 main industries in the S&P 500 dropped, with financial, telephone and energy shares falling the most.

Crude oil traded near its lowest level in three months. West Texas Intermediate oil fell as much as 1.8%. Treasury 10-year note yields were little changed at 2.62% at 2:41 pm in New York, according to Bloomberg Bond Trader prices.

President Barack Obama said he’s not at all resigned to a shutdown and will speak with congressional leaders on Monday.

In the Senate, Republican leaders were weighing a one-week stopgap measure to keep the government operating, according to a congressional aide. Reid said he would oppose such a plan.

Obama’s Cabinet

Obama will meet with his cabinet on Monday as agencies prepare for a shutdown and he plans to reiterate to reporters that he won’t give in to Republican demands over the health law, according to an administration official who asked for anonymity to discuss strategy. 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.

“We won’t be extorted now,” said Senator Charles Schumer, a New York Democrat. “We won’t be extorted two weeks from now. We won’t be extorted in December.”

The fallout in the US government services would be far-reaching: national parks and Internal Revenue Service call centers probably would close. Those wanting to renew passports would have to wait and the backlog of veterans’ disability claims could increase.

“The Senate probably will take up a separate Bill to ensure that the US troops along with some civilians and contractors are paid if the government shuts down,” said Senator Richard Durbin, the second-ranking Democrat in the chamber. The House unanimously passed the plan early Sunday.

Shutdown Politics

The political implications are much less clear. Democrats are painting Republicans as obstructionists who are trying to undo a law passed by Congress, upheld by the Supreme Court and ratified by Obama’s re-election in 2012. Republicans say they are trying to save Americans from the effects of the law, known as Obamacare, and that Democrats won’t negotiate.

A Bloomberg National poll conducted on 20-23 September shows Americans narrowly blame Republicans for what’s gone wrong in Washington, just as they did when the government closed in 1995 and 1996—two of the 17 times US funding stopped since 1977. A CNN/ORC International poll conducted on 27-29 September and released on Monday said 46% of respondents would blame congressional Republicans for a shutdown, while 36% would say the president was responsible.

“There aren’t any Republicans talking about shutdown,” Senator John Thune, a South Dakota Republican, told Bloomberg Television’s Peter Cook. “We want to fund the government.”

‘Moment of Truth’

House Republicans said they’ll respond by again asking for changes to Obamacare and spent Sunday trying to shift blame for a shutdown to the Democrats.

In a government shutdown, essential operations and programmes with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments.

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 furloughed workers.

Greg Valliere, chief political analyst for Potomac Research Group Holdings in Washington, told Bloomberg Television on Monday that a shutdown is not the issue because default is more important.

“If we even talk about default, if we come within a day or two of default, that’s a terribly negative story for the overall economy,” he said.

Republican Rule

Because Republicans hold a majority of seats in the House, they decide what goes into the Bills that are brought up for a vote. A faction that opposes compromise with the Democrats has been pushing its leaders to keep fighting rather than bring a bill to the floor that both parties could accept.

Earlier this month, Boehner and majority leader Eric Cantor of Virginia initially supported a plan that would have let the Senate send a Bill without policy riders straight to Obama.

Now, without enough Republican support, the only way to pass such a Bill is with Democrats voting yes. That scenario poses a risk for Republican leaders: If their decision angers a large bloc of their membership, the next time the top jobs come up for a vote they could could be pushed out.

That bloc of hard-liners could also stall other legislation, including the need next month to raise the $16.7 trillion federal debt ceiling.

‘Won’t Succeed’

“This strategy won’t succeed,” Senator John McCain, an Arizona Republican, told reporters at the Capitol. “We will not repeal Obamacare, and sooner or later we will resume the functions of government without a repeal of Obamacare and without changing it.”

The House plan being considered by the Senate would authorize 10 weeks of spending starting Tuesday only if much of the health law is delayed for a year. While House Republicans backed off defunding Obamacare in favour of delaying most of its provisions, Democrats haven’t budged in their support for the health law.

The latest House plan leaves intact some parts of the healthcare law already in effect, such as requirements that insurers cover pre-existing conditions and that family plans cover children to age 26.

The House added language that would let insurers deny abortion coverage based on religious or moral objections. The House measure also would delay a requirement for people to purchase coverage or face a penalty, and postpone the creation of marketplaces—which are supposed to start functioning from 1 October—where people could shop for coverage from private insurers. Further, it would repeal the 2.3% medical device tax, which would increase the US deficit by about $29 billion during the next decade. Bloomberg

Derek Wallbank, Caitlin Webber, Heidi Przybyla, Roger Runningen, Danielle Ivory, Kasia Klimasinska, Peter Cook, Laura Litvan, Leslie Hoffecker, Margaret Talev and Michael C. Bender in Washington, Emma Oliver and Lars Paulsson in London, Takashi Hirokawa in Tokyo and Kyoungwha Kim in Singapore contributed to this story.