For the first time in nearly two decades, the US government staggered into a partial shutdown on Monday at midnight after congressional Republicans stubbornly demanded changes in the nation’s healthcare law as the price for essential federal funding and President Barack Obama and Democrats refused.
Global markets were choppy on Tuesday as hopes of a last minute resolution on the US government shutdown died and the White House ordered government agencies to begin shutting down. The shutdown could slow growth and spook investors worldwide. Asian stocks pared gains and India’s benchmark Sensex shed around 100 points after a positive start. Overnight, the Dow Jones Average in the US closed down 129 points, its seventh loss in eight sessions.
things to know
- Democrats, Republicans in showdown over shutdown: The White House ordered government agencies to begin shutting down after the Democratic-led Senate and Republican-controlled House refused to back down in a clash over scaling back President Barack Obama’s landmark health care law as the price for essential federal funding.
- What is the US government shutdown? It is a political situation in which the government stops providing for all but “essential” services such as police, fire fighting, etc. So unless Congress raises the federal borrowing cap (the legal limit on how much debt the US government can pile up), some of the government would shut down on October 1 as it will run out of money to pay its bills
- Why will the government stop funding services? The US budget year ends on September 30. The House of Representatives and Senate are considering bills to fund the government past the deadline. But Republicans want to cut off funding for President Barack Obama’s health care law as a condition of passing the spending measure. The Senate and the White House are unwilling to agree. Unless one side essentially blinks, a partial shutdown of the government will occur.
- Has it happened before? The US federal government has shut down on 17 occasions since 1976.
- How will it affect US citizens? About one-third of the government will shut down. About 800,000 of about 2.1 million federal employees will be sent home without pay. National parks will close. The Environmental Protection Agency, NASA and other agencies will close most operations. The military and other agencies involving safety and security would continue to function.
- What if Congress can’t agree to raise the cap in time? It could be disastrous. The government might be forced to immediately slash spending by 32 per cent, the Bipartisan Policy Center estimates. The government could miss interest payments on Treasurys, triggering a first-ever default by the U.S. government. U.S. Treasurys are held by banks, governments and individuals worldwide. Ultimately, a prolonged default could lead to a global financial crisis.