US Shutdown

Oct 14, 2013 11 Comments by

 

So, let’s first understand why does the US government shut down? The Federal Reserve needs money to carry on these operations. The US budget year begins on 1st October. So, the Congress needs to approve laws, known as appropriations that provide money for federal agencies. This time Congress has not passed even a single appropriation. Congress consists of two parts the Senate and the House. Democrats, Obama’s party, dominate the Senate while Republicans have a majority in the House of Representatives. All appropriations have to be approved by the House.

So, why are the Republicans opposing appropriations? The US government has been spending more than it is earning. To fill this gap they have three options – to print more money, cut down the spending or borrow money by issuing bonds. Printing more money will lead to depreciation of dollar and high inflation. Cut down in spending will lead to a slowdown in already sluggish economy. So, the only option is to issue bonds. Obama is proposing a new bill, Obamacare which will improve the medical benefits and services provided by the government. This in return will increase the spending.  US government already has a debt of $16.7 trillion. Obamacare would add to the strained financial of the company. So, the Republicans are dead against this. While Obama is adamant on implementing this on back of his long term vision and vote bank politics.

All this has created an impasse between the Democrats and the Republicans. Republicans are not ready to pass any law if Obamacare is not called off. The government shutdown is not a complete shutdown. It is just a partial shutdown. All the federal services like museums, postal, national parks, traffic controllers etc. are stopped. A total of about 800,000 employees are affected by this. The essential services like social security, Medicare, military etc are working uninterrupted.

According to the Congressional Research Service, the two previous shutdowns – in late 1995 and early 1996 – cost the country $1.4 billion. The last US shutdown took place under Bill Clinton almost 18 years back which lasted 21 days.

The next roadblock for Obama is the debt ceiling limit. On Oct 17, US will hit its debt ceiling of $16.7 trillion. So, if the limit is not increased immediately US will default on the payment of interest on its bonds. This will lead to a complete financial chaos across the globe. The Republicans might give a short term debt ceiling raise for 6 weeks which will give a breather to the government. However, they are very adamant on calling off Obamacare. It will be interesting to see which side has the final say.

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11 Responses to “US Shutdown”

  1. Debt Ceiling: What is a debt ceiling? - Quora says:

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  2. Debt Ceiling: Is the U.S. debt ceiling unconstitutional? - Quora says:

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  3. 2013 U.S. Federal Government Shutdown: Will the shutdown end and the debt ceiling be raised before the 17th? - Quora says:

    […] Comment Loading… • 12 Oct 1  Shubham Deva http://52weekhigh.in/…Comment Loading… • Just now 1  Jeff Lee, CFO, Truth SeekerCFO, Truth Seeker Yes, on the […]

  4. What is the meaning of US govt shutdown? - Quora says:

    […] 4  Hunter McCord Votes by Miguel Valdespino, Ashwin Kotagal Vinayak, and Varsha Venkatesh.A US government shutdown is a situation in which Congress fails to pass authorization for sufficient funds for government operations. Typically, the government stops the non-essentials services it provides and if no agreed for a budget comes to pass, other services will be ceased. At the heart of the matter is a disagreement on the budget and spending between Congress and Senate and the President.This has happened before alas 17 years ago under President Clinton. As far as functioning again, it will take concessions from both sides of the aisle to get the government functioning again.Embed QuoteVia Ashwin Kotagal Vinayak.1 Comment Loading… • 2 Oct 1  Shubham Deva http://52weekhigh.in/… […]

  5. Politics: Who is to blame for the poor handling of the US government "shutdown" - Quora says:

    […] 1  Ken Larson, Over 30 years in federal government contract management and 10 years in small business consulting. As a Micro Mentor Volunteer Counselor,… (more) Over 30 years in federal government contract management and 10 years in small business consulting. As a Micro Mentor Volunteer Counselor, assists many small businesses with their planning and operations processes. Small business owners or prospective owners locate through a background search capability at the Micro Mentor Web Site. Receives many inquiries from small companies wishing to enter or enhance their position in federal government contracting. Volunteer time, books, articles, and resources are 100% free through two web sites maintained on the above subjects. Specialties: Counselor web site is located at: http://www.micromentor.org/ search on "Kenneth Larson" or key words, "Federal Government Contracting" We all share the blame with our current culture and the candidates we allow to be financed into office emphasizing:1. Short sighted thinking2. Short term investment for near term return3. TyrannyWe  target our elected officials as figureheads for our frustration, when  in fact the real culprit is a big, faceless machine grinding onward,  never changing, because we (the citizenry and the politician) will not  bite the bullet and dismantle it. It finally collapses of its own  weight.Tyranny sprouts within massive bureaucratic organizations  that imbed themselves in economies and assume a life of their own.  These organizations become entrenched and difficult to change because  they are wired to so much of economic and public life (a defense company  in every state, a pork project tacked onto a defense appropriation).Some  who analyze tyranny believe the best way to avoid it is to avoid  violations of the constitution. That is a bit simplistic in our era. The  conundrum is detecting complex circumstances with the potential to  become violations of the constitution before they become horror stories as recently revealed by our whistle blowers and our shutdowns and do something about them IN ADVANCE.As students of history we know much of what we are experiencing today in war and politics is tied to human nature. A  new brand of politics and accountability must emerge, one that will  deal from within when organizations self-destruct catastrophically from greed and avarice. The big issue after such events will be: "What do we  put in the place of such bureaucracies gone afoul?" The US  political system classically appoints a blue ribbon panel to study such  problems spread the blame and writes a detailed report no one reads. We  must do better then that in the future. The impending trauma will not  permit it.Embed QuoteComment Loading… • 6 Oct 1  Shubham Deva http://52weekhigh.in/… […]

  6. 2013 U.S. Federal Government Shutdown: What is the US government shutdown? What could be its outcome? How does it affect the US and the world economy? - Quora says:

    […] 91  Alok Pandey, | | अहं ब्रह्मास्मि | || | अहं ब्रह्मास्मि | | Votes by Nipun Garg, Adithya Bharadwaj, Abhishek Desikan, Sravan Kumar, and 86 moreLoading….Please explain what just happenedThe US government has begun shutting its non-essential services. Hundreds of thousands of workers are waking up to the news that they are on unpaid leave, and they don't know how long it will last. The shutdown, triggered at midnight Washington time, will bring a range of services to a standstill across the world's largest economy.Why?The Federal government had no choice. The US financial year ended on 30 September, and politicians on Capitol Hill have failed to agree a new budget for the 2013-2014 financial year. Even a 'stopgap' funding deal proved beyond them. Without a budget deal approved by both parts of Congress, the House of Representative and the Senate, there's no legal agreement to pay non-essential staff.Weren't they supposed to fix this last night?They tried. A series of proposals rattled between the two sides on Monday night until midnight struck without a deal.Why couldn't they agree a deal?Under the US constitution, the president cannot unilaterally bring in legislation. And despite weeks of talks, Republicans continue to include cuts and delays to Barack Obama's Affordable Care Act in the budget legislation they sent up to the Senate.The House of Representatives is controlled by the Republican Party, whose Tea Party movement remain deeply opposed to Obamacare. They tried to use the budget as leverage to crowbar changes to the Act. The Senate, which is under the control of Obama's Democrats, has stood firm.Will the shutdown mean the entire US government grinds to a halt?No, it's not an anarchist's (or libertarian's?) dream. Essential services, such as social security and Medicare payments, will continue. The US military service will keep operating, and Obama signed emergency legislation on Monday night to keep paying staff. But hundreds of thousands of workers at non-essential services, from Pentagon employees to rangers in national parks, will be told to take an unpaid holiday.So what happens how?US politicians are meeting again in Washington on Tuesday. Before Monday's session broke up, the lower house proposed a 'bipartisan committee' to consider a way forward. The Senate is expected to reject this proposal, sticking to its position that Obamacare cannot be unravelled. Federal staff will remain unpaid until a budget is agreed. A 'stopgap' funding plan is an option, but Obama appeared wary of that option, arguing that would simply guarantee a repeated fight in a few weeks' time.How much damage will it cause?If people aren't getting paid, they won't spend as much in the shops. They may be unable to meet essential financial commitments, such as mortgages and credit card payments.Analysts at IHS Global Insight have calculated that it will knock $300m a day off US economic output (total US nominal GDP, or output, was around $16 trillion last year).The key issue is how long it lasts. Moody's Analytics reckons that a two-week shutdown would cut 0.3% off US GDP, while a month-long outage would knock a whole 1.4% off growth.When did this last happen?It's the first shutdown since 1995-1996, when Bill Clinton and the House of Representatives (and its speaker, Newt Gingrich) also failed to agree on a budget to fund federal services. That row ran for 28 days (over two stages).But it was a more regular event in the 1980s, usually for a few days at a time. In total, the US government has partially shut down on 17 occasions before today.Why doesn't it happen in other countries?The shutdown situation is a product of the US democratic system. The president is both head of state and head of the federal government, without a guaranteed majority in either of the legislative bodies where new laws are debated and voted upon (because presidents, congressmen and women and senators are elected separately). The president can't simply ram laws through Capitol Hill.In Britain, for example, tax and spending policies are outlined in the budget, presented to parliament by the chancellor of the exchequer. These changes are brought into law in a finance bill in the House of Commons. That's in effect a confidence vote in the government, and even the most fractious backbench MP would balk at rebelling on it.Finance bills are also one area where the elected House of Commons has the upper hand over the unelected House of Lords. The Lords have no power to reject a money bill; they can only delay it for a month.How does the US shutdown row tie in with the debt ceiling battle?They are separate issues, but the shutdown is raising fears over the debt ceiling.America has a legal limit on its borrowing of $16.7tn dollars, and it's likely to hit that point in mid-October.If a deal isn't reached, then America would run out of borrowing room, meaning the world's biggest economy would default on its debts. Both problems need solving – and a shutdown is now eating into valuable time to fix the debt ceiling.Why can't they just raise the debt ceiling?Again, legislation is needed. Republicans are again trying to link the plan to Obamacare – arguing that the healthcare reforms are unaffordable.How are the markets reacting?So far, there's no panic. Investors are calculating that the shutdown will be short. But prepare for nervousness as that debt ceiling deadline gets closer.The dollar, though, is being hit – dropping half a cent against major currencies.–from an article published in The Guardian by Graeme WeardenEmbed Quote1+ Comments Loading… • 1 Oct 1  Shubham Deva http://52weekhigh.in/… […]

  7. 2013 U.S. Federal Government Shutdown: How does the US government shutdown affect people in India? - Quora says:

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  8. Economics: What is the impact of US government shutdown on India and Indian economics? - Quora says:

    […] 1  Mohit Arora, GOD made me an Indian and I thank him for that, each and every day of my life.GOD made me an Indian and I thank him for that, each and every day of my life. At first the US government shutdown had no major impact on India or Indian economy but now that this shutdown is in it's second week (and soon it will be in it's third week), all the developing countries of the world, including India, should start worrying. The main impacts of this shutdown that I can think of are ->1. Indian market may crash. Since a large part of global market depends on US, if the global market becomes volatile then it will affect Indian market as well and Indian stocks may suffer. 2. Since this shutdown is affecting US IT sector as well, the business of many Indian companies that generate revenues from US IT sector may get affected in case of a prolonged shutdown.3. Indian rupee will keep dropping. (Indian rupee showed a tremendous improvement as compared to dollar in the month of September but with Government shutdown and few other factors it has again started to drop)Embed QuoteComment Loading… • Wed 1  Shubham Deva http://52weekhigh.in/… […]

  9. International Economics: What will be the long term effects on the global economic situation of the impending US Government shutdown? - Quora says:

    […] 1  Ken Larson, Over 30 years in federal government program and contract management and 10 years in small business consulting. As a Micro Mentor Voluntee… (more) Over 30 years in federal government program and contract management and 10 years in small business consulting. As a Micro Mentor Volunteer Counselor, assists many small businesses with their planning and operations processes. Small business owners or prospective owners locate through a background search capability at the Micro Mentor Web Site. Receives many inquiries from small companies wishing to enter or enhance their position in federal government contracting. Volunteer time, books, articles, and resources are 100% free through two web sites maintained on the above subjects. Specialties: Counselor web site is located at: http://www.micromentor.org/ search on "Kenneth Larson" or key words, "Federal Government Contracting" 1.  Impact on the stock markets of the world.2.  Perception of our government by other countries.3.  Our economic rating to those who buy our bonds and those to whom we owe enormous amounts of interest.Embed QuoteComment Loading… • 1 Oct 1  Shubham Deva http://52weekhigh.in/… […]

  10. 2013 U.S. Federal Government Shutdown: Why is there little discussion about the US Federal Government Shutdown on Quora? - Quora says:

    […] topic for debate because public opinion i…Comment Loading… • 13 Oct 1  Shubham Deva http://52weekhigh.in/…Comment Loading… • Just now Loading… require.enqueue(function(require) { […]

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