By Simi Mehta
It has been said that conflict is endemic to budgeting. If conflict within Congress or between Congress and the President impedes the timely enactment of annual appropriations acts or continuing resolutions, a government shutdown may occur.
Article One, Section Nine of the US Constitution states that no money shall be drawn from the treasury, but in consequence of appropriations made by law . Since the US Congress was unable to enact regular appropriations for the fiscal year 2013-2014, after the budget year ended on September 30th, 2013, the federal government was shut down as it officially ran out of money.
The impasse or the financial shutdown is not a new event in the history of the federal government of USA. The country has seen similar situations in the 1980s and 1990s, primarily as a result of the contradictions over funding for spending, due to opposing ideological stance of the Republicans and Democrats at the Capitol Hill.
“Shutdown” is a political situation in which the government is unable to seek Congressional approval for fresh spending, and due to which the government stops providing for all but “essential” services such as police, fire fighting, etc. unless Congress raises the federal borrowing cap or the legal limit on how much debt the US government can pile up.
The current impasse was over the “ideological crusade”, that is, the Republican opposition to the Patient Protection and Affordable Care Act, commonly known as “Obamacare”. This has shut down over a third of the government. Around 40 per cent of the federal employees furloughed. While the military and other agencies involving safety and security would continue to function, national parks and other tourist attractions have been closed. The Environmental Protection Agency, NASA, the US Department of Agriculture and other agencies have closed most of their operations. The National Institutes of Health has been disallowed on new clinical trials or see new patients. Social Security payments, Medicare and Veteran Affair care would continue, but there could be delays and new claims may not be processed. The Department of State would halt new passport and visa applications, and neither would loan applications be processed. Analysts say the shutdown means a reduction in collective American income of about $200 million per day.
According to Moody?s Analytics, a three-four week shutdown would cost the US economy $55 billion and lost wages of Federal employees will amount to about $1 billion a week. A failure to raise the government’s $ 16.7 trillion debt ceiling by mid-October could be disastrous for the US economy, leading to a slowing of economic growth and may even force the government to cut down spending by over 30 per cent. This could result in defaulting with the interest payments of the US Treasury bills, which are held with individuals, banks and governments across the world. A continued non-payment would lead to sharp volatility in stock markets and a temporary weakening of the US dollar, ultimately heading the world to a financial crisis.
The shutdown has also led to the cancellation of the scheduled Obama trip to Asia, and is seen as undermining his East Asian foreign policy, thereby delaying some important trade deals with these countries. A federal government shutdown could have possible negative security implications, as some entities wishing to take actions harmful to U.S. interests may see the nation as physically and politically vulnerable.
According to the US Treasury Department report, in the event that debt limit impasses were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth. President Obama, not keen to tinker with his signature health care law, urged the Republicans to banish their party lines and collectively contribute to passing a budget that funds our government with no partisan strings attached. The public sentiment over the shutdown was succinctly underscored by the President when he said that The American people elected their representatives to make their lives easier, not harder, and hence would be wise for the policymakers in the Hill to call the phase off as soon as possible.
The author is a Ph.D scholar in the American Studies Program at the Centre for Canadian, United States and Latin American Studies, School of International Studies, Jawaharlal Nehru University, New Delhi, and can be reached at simi@manavdhara.org.