News Column

US Government Shutdown: What to Look At

September 24, 2013

The fiscal risk is back to agitate markets once again, and even with confirmations from US lawmakers that the US government will continue to be funded beyond September 30, a government shutdown is still a risk, a couple of weeks ahead of another debate on the debt ceiling.

Many confuse the government shutdown as the same as the debt ceiling, but in fact they are not the same. A government shutdown is known as a state when the federal government runs out of funding and starts to partially shutdown federal operation with the end of the fiscal year 2013, September 30.

To avoid the shutdown, what is known as a Continuing Resolution (CR) is drafted by Congress to fund the government after September 30.

The Republican-controlled House passed a CR that would fund the government until December 15; the key in the Friday morning vote that passed 230-189 on the $986 billion bill was defunding Obamacare, a matter Obama threatened to veto and the Senate is likely to block as well.

The CR gives time to policy makers to reach deals on other bills and prevent a government shutdown.

Yet in our case, the CR is likely to be returned from the Democrat-controlled Senate to Republican House Speaker John Boehner without the defunding on Obamacare for sure to again revive the debate between both parties.

The vote from the Senate is expected sometime this week ahead of September 30 deadline to send it back to the House. This is the Republicans chance to dismantle the healthcare overhaul for Democrats and President Obama, and risk the first government shutdown since 1996.

A government shutdown if not averted, there will be funding shortfalls for executive branch of government some government functions will be suspended and employees will be furloughed. Necessary operations such as inpatient and emergency medical care and traffic control will be exempted from the shutdown.

Now, with the expectations the Senate will reject the House CR the House will be considered to work on another CR that is clear of any provisions, this is where the vote might be caught up again as Republicans withhold their opposition to Obama's healthcare plan.

The vote should be finalized before October 01 to prevent a shutdown and provide the funding for the government to continue operations.

Aside from this impending vote, we turn to the debt ceiling vote. The debt limit is the legal set limit for the government's ability to borrow. The US government will hit the debt ceiling currently set at $16.7 trillion mid-October.

In the case the US hit the debt ceiling; the Treasury will be short on liquidity to meet its obligations forcing the government to default.

The Republicans again want more from the Democrats to pass the new bill that will go into debate also next week as the Treasury can only stall into November and then will be forced to default on its obligations.

With the October 01 deadline approaching, passing a "clean" CR by the House will intensify again the debate on the debt ceiling. Republicans want to shut Obamacare and also want to pass the oil pipeline running from Canada to the Gulf of Mexico, and other tax provisions which will be important aspects of the debate.

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Source: (c) 2013 ICN.COM. ALL RIGHTS RESERVED Provided by an company

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