Shut Down! Why the Current Federal Budget Crisis May be the Least of our Worries!
For the first time in 17 years the US Government has partially shut-down after last minute overtures by the House failed to break a stand-off with the Senate and the President on the federal budget. So at midnight last night, the Federal Government essentially ran out of money.
This is what impasse looks like! The Republican-controlled House and the Democrat-controlled Senate hold two very different positions on spending, budgeting, appropriating and what they believe the American people want.
This new federal funding crisis means that 800,000 federal workers have been furloughed and up to a million will be asked to work without pay. Funding for the federal government under President Obama has come close to running out previously but lawmakers had always reached a last minute compromise that kept the government running. Not this time.
A shut-down of federal services occurs because the government lacks the legal authority to spend money without an approved budget. One of the key duties of Congress is to pass spending bills, so yes, Congress has failed to do its job.
At the center of the standoff is Obamacare! In the final hours of last night’s negotiations, the Republican-controlled House presented a new plan to keeping the government running but to delay the Obamacare “individual mandate” which requires citizens to purchase health insurance or pay a penalty. The Republican bill also included provisions to withhold federal healthcare subsidies to members of Congress, Capitol Hill staff, White House staff, the President and Vice-President. But in less than an hour, the Senate stripped the provisions and sent the bill back to the House. The Senate had sent back an earlier bill presented by the Republicans in less than 25 minutes.
Both sides have refused to seek middle ground! The Republicans are insisting that any new fiscal spending should essentially “defund” Obamacare, while the Democrats outright reject such a notion. So the US Government now finds itself without a budget for the new fiscal year starting today and no legal authority to spend money. As a result, federal functions that are deemed “non-essential,” or that do not protect life and property, will be shut-down. This mainly impacts civilian federal employees at National Parks, Zoos, and Museums, as well as initiatives at the FDA, Health and Human Services, the Census Bureau, the Federal Housing Authority, the Library of Congress, Headstart, etc. Most major functions of government and over 3 million workers deemed “essential” will continue uninterrupted. This includes the departments of Social Security, Medicare, the US Postal Service, Air traffic Control, Border Patrol, Immigration services, Emergency and Disaster Assistance, most Military operations, and of course the IRS.
While the government lacks the legal authority to spend money without an approved budget, it likewise lacks the legal authority to borrow money beyond an approved debt limit. The government runs out of “borrowing authority” in just 17 days.
If the US hits its debt limit on October 17th what will happen then? The United States has never defaulted on its Federal Debt. To do so would be a stunning blow to the American economy. Wall Street would spiral, job creation would tank, the US credit rating would plunge, and America’s overall standing in the world would free-fall. I say “never” understanding that in this political and economic climate … anything seems possible.