U.S. government shutdown begins after Congress fails to break impasse - page 2
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Obama Predicts Debt Ceiling Deal in Time as Shutdown Lingers
President Barack Obama said he expects Congress will reach an agreement to raise the nation’s $16.7 borrowing limit in time to avert a default.
“America has never not paid its bills,” Obama said in an interview with the Associated Press. “I don’t expect to get there.”
The interview was released today as a partial shutdown of the U.S. government entered its fifth day and less than two weeks before an Oct. 17 deadline for raising the U.S. debt ceiling. Obama said comments yesterday from House Speaker John Boehner, an Ohio Republican, indicate that “Speaker Boehner is willing to make sure that we don’t default.”
The U.S. president asked Americans for patience after technological glitches have made it difficult for millions of Americans to access a website that opened Oct. 1 for the six-month open enrollment period under the U.S. health-care law that is his signature domestic policy.
“The website got overwhelmed by volume,” he said of the higher than expected interest in the program. “The insurance doesn’t start until January. So they’ll have plenty of time.”
Obama also said in the interview that U.S. intelligence officials continue to believe Iran is “a year or more away” from the ability to produce a nuclear weapon.
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"Agreement Is Almost Impossible As Long As Obamacare Is On The Table"
Bank of America's latest forecast on the resolution, or lack thereof, of the government shutdown, which now seems virtually certain to last at least one week into Monday night, when the House and Senate return to work, is hardly encouraging. The bank's base case now calls for "either a two-week shutdown or for multiple shutdowns." Additional, BofA has now cut its Q3 GDP forecast from 2.0% to 1.7% and from 2.5% to 2.0% for 4Q. It gets worse: "Much worse outcomes are possible. In our view, agreement is almost impossible as long as the Affordable Care Act is on the table." Finally, and what ties it all together, is that as a result of the lack of "government data", BAC now expects the Fed to delay tapering to their January meeting, or later. Which may well have been the much needed alibi all along to delayed tapering until 2014.
From Bank of America
The shutdown of the government has created a double dose of uncertainty. It comes at a time when the economy may be about to shift from second gear into third gear, triggering the beginning of a Fed exit. The longer the shutdown and the longer the games of brinkmanship, the longer the delay in that growth pick up. At the same time, the shutdown means almost no official data releases. In the face of this uncertainty, the Fed’s motto is: when in doubt, do nothing.
Our base case is now for either a two-week shutdown or for multiple shutdowns. We have cut our forecast for GDP growth from 2.0% to 1.7% for 3Q and from 2.5% to 2.0% for 4Q.We also expect the Fed to delay tapering to their January meeting, or later.
Much worse outcomes are possible. In our view, agreement is almost impossible as long as the Affordable Care Act is on the table.The President is very unlikely to agree to cuts in his proudest legislative achievement. Moreover, in our view, he is in a strong negotiating position vis-à-vis House Republicans. He does not have to run for office again, while they are all up for reelection next fall. Surveys show Americans strongly disapprove of the shutdown and put more blame on Republicans than Democrats. Surveys also show that Americans think it is not worth shutting the government down as a means to end the ACA. On the other hand, most Republicans strongly oppose the ACA and many support shutdowns as a means to an end. Ultimately we expect Republicans to drop the effort to weaken the ACA, but this could take a while.
It is very hard to measure the impact of the shutdown on the economy, although every economist has to come up with numbers. Most of the press reports seem very much on the low side, in our view. The direct impact is easy to calculate. The Clinton-Gingrich shutdown directly reduced GDP by about 0.3% in 4Q 1995 and a two-week shutdown today would have a similar impact. However, we think these narrow estimates are wishful thinking. There will likely be numerous spillover effects and, even if the shutdowns are brief, multiple brinkmanship moments will take a toll on confidence. We hear a lot of talk about buying on dips, but getting the timing right could be very tough.
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US shutdown is starting to hit business, says Commerce Secretary
US Commerce Secretary Penny Pritzker has warned that business is starting to suffer from the federal shutdown.
Her comments at the Asia-Pacific Economic Cooperation (Apec) came as leaders gathering for the summit voiced worries about the US situation.
Philippine President Benigno Aquino said that what happens in the US "affects us all".
On Friday, the US defence contractor Lockheed Martin said it would put 3,000 workers on unpaid leave.
The US government closed non-essential operations on Tuesday after Congress failed to agree a new budget.
And President Barack Obama cancelled a scheduled trip to Asia because of the shutdown.
"The shutdown is not good for business. It's not good for the economy," Ms Pritzker said. One consequence of the shutdown had been her department's inability to collate vital economic data.
"We're a huge source of data for American business and that is a problem... It's affecting businesses and it's affecting their ability to get data," she said.
From Monday, Lockheed will put 3,000 staff on leave, but the defence giant said this number would rise if the shutdown continued.
"I'm disappointed that we must take these actions and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown,'' Marillyn Hewson, Lockheed's chief executive and president, said in a statement.
"We hope that Congress and the Administration are able to resolve this situation as soon as possible," she added.
The announcement followed United Technologies' decision to temporarily lay off 2,000 employees.
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Boehner Says We Are "On The Path To Default", "It Is Time For Us To Stand And Fight"
Despite the late Friday market optimism that the government shutdown, and more importantly debt ceiling impasse, may both be coming to an end as more republicans appeared ready to pass a "clean" continuing resolution, it was only fitting that a few hours after Bank of America said an "agreement is almost impossible as long as Obamacare is on the table", that the House speaker Boehner, who appeared on ABC with George Stephanopolous' This Week earlier today, escalated matters once again making any near term resolution virtually impossible.
That this happens on day 6 of the government shutdown (and with neither chamber of Congress set to meet until Monday evening, an eight day or longer shutdown is virtually inevitable) is bad. That this is happening with 11 days left until the debt ceiling X-Date is worse, especially since the republicans have made it clear they will now look to roll the debt ceiling negotiation into the government shutdown debate, both of which are driven fundamentally by the republicans' opposition to Obamacare. Furthermore, with the halfway reopening of the government following the recall of furloughed Pentagon civilian employees, the government's cash will run out that much faster.
Ironically, the fight to defund Obamacare came in earlier than many had expected. As Politico notes, Boehner had expected that the Obamacare fight would come during the next vote to raise the debt ceiling, “but, you know, working with my members, they decided, let's do it now," he said. "And the fact is, this fight was going to come, one way or another. We’re in the fight. We don't want to shut the government down. We’ve passed bills to pay the troops. We passed bills to make sure the federal employees know that they're going to be paid throughout this.... You've never seen a more dedicated group of people who are thoroughly concerned about the future of our country," he said of House Republicans.
"It is time for us to stand and fight." Boehner added.
Below is the excerpt which contains Boehner's admission that he may have changed his mind on a stern resolve to not let the US default:read more ...
A one-month shutdown risks triggering 20% to 30% correction: Barry Ritholtz
A government shutdown that drags on for a month or longer could trigger a 20% to 30% correction in the market, Barry Ritholtz said in an interview with Yahoo Finance.
The U.S. is kicking off its second week of a partial shutdown, and the heated rhetoric spewing from politicians on both sides of the aisle doesn’t bode well for the chances of a speedy compromise. (Indeed, things were so hunger-inducing in Washington, D.C. on Friday that President Barack Obama and Vice President Joe Biden walked over to a nearby shop for hearty sandwiches.)
After three or four weeks, the shutdown would “take a big chunk” out of gross domestic product, chip away an consumer confidence and “really have an impact on earnings,” Ritholtz said. “Earnings are at a very high cyclical level,” he said in an interview posted Friday. “And if we do anything to damage that, you risk a 20% to 30% correction in the market if this goes on for a month or longer,” he said.
The S&P 500 SPX -0.85% and Dow Jones Industrial Average DJIA -0.90% both posted losses for the week ended Friday, the second weekly decline in a row. Read: Shutdown threatens to overshadow earnings
By Ritholtz’s calculations, Congress has roughly until November before stocks take a deep hit. That’s well after Oct. 17, the deadline for Congress to raise the debt limit. A failure to raise the debt limit by that date would mean the U.S. won’t be able to borrow money to pay its bills, which would trigger a default, Treasury Secretary Jack Lew has said.
While most investors don’t see a U.S. default as a likely scenario, Ritholtz said he thinks the U.S. won’t technically default even if Congress fails to raise the debt ceiling.
“All the U.S. obligations are money good,” he said, adding that the Treasury Department could continue to “move stuff around” to temporarily avoid hitting the limit.
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Obama presses Boehner to open government
President Barack Obama on Tuesday pressed House Republicans to reopen the government and raise the U.S. debt ceiling, insisting he wouldn’t talk with his political opponents until after those two disputes are settled.
“Let’s stop the excuses. Let’s take a vote in the House,” Obama said in a statement at the White House.
Obama said he is happy to talk with House Speaker John Boehner and other Republicans about ”anything.” And he did offer a small olive branch, saying a “process” could be attached to a budget- or debt-ceiling deal.
But Obama said he told Boehner that having a conversation or talks “shouldn’t require hanging the threats of a government shutdown or economic chaos over the heads of the American people.” See recap of live blog of Obama’s statement and press conference.
As the government shutdown marked its eighth day and the U.S. neared the Treasury’s Oct. 17 for raising the $16.7 trillion borrowing limit, Boehner again called on Obama and Democrats to come to the table and hammer out a deal. He said he had no conditions for talks and wasn’t drawing a line in the sand for the White House.
Stocks were down more than 100 points on Tuesday afternoon as the shutdown dragged on. See Market Snapshot.
Yields on one-month Treasury bills spiked. See Bond Report.
Obama didn’t explicitly rule out on Tuesday a new proposal from Republicans for a supercommittee on fiscal issues. But he noted that budget committees already exist.
On Capitol Hill, Senate Majority Leader Harry Reid said he would introduce a clean debt-limit bill, free of policy prescriptions. Republicans have been clamoring to include spending cuts or changes to Obama’s health-care law but Democrats have ruled out such provisions.
Democrats would need six Republicans to join them to pass a procedural motion with 60 votes, if Republicans decide to filibuster.
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Obama to meet House GOP leaders in standoff thaw
The partisan logjam that has paralyzed the capital showed signs of easing, as House GOP leaders prepared for their first meeting with President Barack Obama since the government shutdown began.
Top House Republicans prepared to head to the White House Thursday to discuss the issues underlying the standoff that has resulted in the nine-day partial government shutdown and that now threatens the country’s ability to borrow.
The White House said the session isn’t a negotiation, in keeping with Obama’s demand that lawmakers raise the debt ceiling and fully reopen the government without conditions before policy talks are held. But the meeting may allow House Republicans to say they had a policy conversation with the president, which they have been saying is a condition of resolving the impasse.
Solving an immediate impasse over the debt ceiling wouldn’t necessarily resolve the spending fight that has closed the government. Many of the same conservatives who backed a short-term extension of the country’s borrowing authority said they are willing to keep parts of the government shuttered in order to keep fighting over the health law.
Obama has invited the two parties’ House and Senate caucuses to meet with him separately at the White House this week. But House Republican leaders, rather than sending their full membership of 232 lawmakers, on Wednesday said they would send 18, giving the meeting the sense of a more focused conversation.
The clearest sign of movement Wednesday was among House conservatives. After weeks of insisting that any measure to fund the government or keep it solvent include language to dismantle or delay the health law, conservatives have shifted their focus to broader — and potentially more achievable — deficit-reduction demands.
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It Looks Like The Government Shutdown Is Going To Go On For A Long Time
It looks like the House of Representatives may pass a short-term extension of the debt ceiling but not address the ongoing government shutdown. This might mean a perverse outcome — a government shutdown that lasts longer because the prospect of a payments crisis is delayed.
And that means that the negative effects of a government shutdown are likely to build. A lot of government agencies have an ability to paper over a short-term shutdown — for example, by relying on extra funds they had left over from the previous year.
The longer the shutdown goes on, the less workable that approach will be. Here are a few ways in which the shutdown will keep getting worse if it goes on for several more weeks.
Federal courts. So far they have stayed open during the shutdown, essentially by searching under the couch cushions for money. Federal courts have announced that they can stay open until Oct. 17 or 18 by using a combination of fee-income and previous appropriations not tied to a specific fiscal year. After that, they'll have to close, stalling any federal trials.
WIC. Unlike most means-tested entitlement programs, the Women, Infants and Children program, which provides nutritional assistance to pregnant women and newborn babies, is funded through the discretionary budget. That means it gets no money if the government is shut down. So far, it's been able to operate by using reserve funds, and the Department of Agriculture has said it will be able to do so through October. The future after that is uncertain.
Federal workers. "Essential workers" — well over a million of them — have to keep working during the shutdown. They'll eventually be paid for their work, but the government can't actually issue them paychecks until the shutdown ends. In most cases, that's been an academic issue so far, since we haven't had a scheduled pay day for most federal workers during the shutdown.
That will change Friday, when many "essential" federal workers will only get 60% of their normal paycheck for the work period that ended on Oct. 4. Four of the 10 business days in that pay period fell in October, during the shutdown. Other federal workers are supposed to be paid on Tuesday, Oct. 15 and will get a similarly short paycheck. And if the government is still shut down by the time the next pay day rolls around near the end of October, these workers won't get any paychecks at all.
Amtrak. Amtrak has said, vaguely, that it will be able to continue operating in a "short-term" government shutdown and that it could continue normal operations for "weeks." But it's not clear how long a company that lost $1.2 billion last year and relies on heavy subsidies by the Department of Transportation can keep running fully operational.
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Obama and Republicans search for a deal on U.S. fiscal impasse
President Barack Obama and congressional Republican leaders inched toward resolving their fiscal impasse on Friday, but struggled to agree on the length and terms of a short-term deal to increase the U.S. debt limit and reopen the government.
Obama met Senate Republicans at the White House and spoke by phone to House of Representatives Speaker John Boehner as negotiations intensified on how to get hundreds of thousands of federal workers back on the job and extend the government's borrowing authority past the October 17 limit.
It was hard to gauge the progress of talks, as all sides refused to divulge many of the specific details of what is being discussed.
But both sides spoke with new optimism about the possibility of avoiding a fiscal crisis. Lawmakers were expected to work through the weekend with a goal of finishing a deal by early next week.
Economists have warned that a debt default would create global economic chaos, and analysts warned on Friday that if the shutdown lasts more than a month it would cause a sharp slowdown in fourth-quarter economic growth.
Obama wants the debt ceiling raised for longer than the six weeks first proposed by Republicans, and Republicans want a commitment to broader deficit-reduction talks from the White House.
"The two of them agreed that all sides need to keep talking," White House spokesman Jay Carney told reporters after the call between Boehner and Obama. "It at least looks
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Fiscal talks falter in House, shift to Senate: lawmakers
Urgent negotiations to end a partial U.S. government shutdown and head off an unprecedented default were now focused on Senate proposals after the White House rejected House Republican ideas, Republican lawmakers said on Saturday.
House of Representative Republicans, after a closed meeting with their leaders, emerged angry, accusing the White House of rejecting their ideas and refusing to negotiate with them.
However, Representative Pete Sessions, a senior House Republican, told Reuters that in coming days a new proposal would be put forth. Many House members were heading to their home districts, having been informed that there would be no votes later on Saturday, Sunday or before Monday evening.
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