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Government Shutdown 1 Day Away as Deal Evades Lawmakers

Photographer: Nicholas Kamm/AFP via Getty Images

A government shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. Close

A government shutdown could reduce fourth-quarter economic growth by as much as 1.4... Read More

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Photographer: Nicholas Kamm/AFP via Getty Images

A government shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists.

Congress is leaving itself just one day tomorrow to end a budget stalemate that raises the risk of the first government shutdown in 17 years as Republicans sought to shift blame for the gridlock to Democrats.

The Senate will reconvene tomorrow afternoon, when it will reject a House plan passed early today to delay and limit President Barack Obama’s Affordable Care Act. In response, the House would add “another provision” to the spending measure and send it back to the Senate, said Representative Kevin McCarthy, the top House Republican vote counter.

The provision would “reflect the House” and would be one “the Senate can accept,” McCarthy of California said on “Fox News Sunday” without offering details.

A likely option would end the government’s contribution to the health insurance of members of Congress and their staffs, as a way of testing Democrats’ willingness to make any changes to the health law, according to a leadership aide who spoke on condition of anonymity to discuss party strategy.

House Republican leaders don’t expect to pass a bill that only extends federal spending, or have enough Republicans who support that, the aide said.

The House version of the spending measure would also delay the start of the health law, which is known as Obamacare. No talks were held today between House Republican and Senate Democratic leaders, even at the staff level, said a Senate Democratic aide who requested anonymity. A House Republican aide confirmed there weren’t talks between House leaders and White House officials.

Photographer: Win McNamee/Getty Images

U.S. House Speaker John Boehner attempted to avoid this fight, offering a plan earlier in September that wouldn’t have tied the health law, which has become known as Obamacare, to the extension of government funding. Close

U.S. House Speaker John Boehner attempted to avoid this fight, offering a plan earlier... Read More

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Photographer: Win McNamee/Getty Images

U.S. House Speaker John Boehner attempted to avoid this fight, offering a plan earlier in September that wouldn’t have tied the health law, which has become known as Obamacare, to the extension of government funding.

Stocks Fall

Concerns that the budget impasse will hurt economic growth helped push the Standard & Poor’s 500 Index to its first weekly decline since August. The index fell 0.4 percent to 1,691.75 on Sept. 27, and dropped 1.1 percent last week. The rate on 10-year Treasury notes fell three basis points to 2.62 percent. About 20 House Republicans gathered today in front of the Senate side of the U.S. Capitol and urged senators to return and take up the spending bill. They accused Democrats of wanting a shutdown to score political points.

“The Senate doors are shut, they are locked,” said Representative Cathy McMorris Rodgers, the chairwoman of the House Republican conference. “If the Senate doesn’t act, it may be inevitable. Why are they waiting?”

Unless differences are resolved, as many as 800,000 federal employees would be on furlough and national parks and Internal Revenue Service call centers probably would close. Air-traffic control and Social Security payments would continue.

Short Term

The latest House plan would authorize 10 weeks of spending starting Oct. 1 only if much of the Obama health law is delayed for a year.

The Senate tomorrow will remove the health-care provisions and return to the House the same six-week spending measure it approved last week, said three Senate Democratic aides, who asked for anonymity to discuss plans.

“The House position, which is basically the same one they sent us the last time, is going to be rejected again,” Senator Richard Durbin of Illinois, the chamber’s second-ranking Democrat, said today on CBS’s “Face the Nation.” Asked if he thought a government shutdown would occur, he said, “I’m afraid I do.”

In a government shutdown, essential operations and programs with dedicated funding would continue. A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers.

Treasury Forecast

A brief government shutdown won’t lead to any significant change of the Treasury Department’s forecast for when the U.S. will breach the debt limit, a Treasury spokeswoman said today in an e-mail. The Treasury has said measures to avoid breaching the debt ceiling will be exhausted on Oct. 17.

The plan passed by the House today opened the second round of volleys with the Senate. While House Republicans have moved slightly off their position -- from defunding Obamacare to delaying most of its provisions -- Democrats haven’t budged in their support for the health law.

Senate Democrats said they will reject the any plan that includes health-care provisions, and Obama said he would veto it if passed by the Congress.

Texas Republican Senators John Cornyn and Ted Cruz said Senate Majority Leader Harry Reid, a Democrat, should call the Senate into session today to consider the latest House proposal.

‘On Vacation’

“There’s no reason the Senate should be home on vacation,” Cruz, who last week spoke on the Senate floor for more than 21 hours to protest the health care law, said today on NBC’s “Meet the Press.”

The Senate can act quickly to pass legislation, if all 100 members agree. If a single member objects, it would block legislation from being passed for four days or more.

With no official action today, the final chance to avert a shutdown could be tomorrow evening, if the Senate turns down the latest House plan, as Democrats promise to do.

At that point, House Speaker John Boehner would have four main choices -- two of which avert a shutdown. He could pass the Senate bill with mostly Democratic votes or attempt a short-term funding extension to keep the government open past Oct. 1, when fiscal year 2014 begins. The last government shutdown was in 1996.

The other two options lead to a shutdown. Boehner could add health-law provisions to the spending bill and ask the Senate to go along, which Senate Democratic leaders have said they’d reject, or do nothing and wait for the political fallout.

Funding Gaps

The U.S. has had 17 funding gaps from 1977 to 1996, based on a Congressional Research Service analysis. In 1995 and 1996, interruptions lasted from Nov. 14 to Nov. 19 and from Dec. 16 to Jan. 6, as Republicans led by then-House Speaker Newt Gingrich clashed over the budget with President Bill Clinton.

The latest House bill leaves intact some parts of the health-care law already in effect, such as requirements insurance companies cover people with pre-existing conditions and that family plans cover children to age 26. The bill would allow insurers to deny abortion coverage based on religious or moral objections.

The House measure would delay a requirement for people to purchase coverage or face a penalty, and postpone the creation of marketplaces -- which are supposed to start functioning Oct. 1 -- where people could shop for coverage from private insurers. Further, it would repeal the 2.3 percent medical device tax, which would increase the U.S. deficit by about $29 billion during the next decade.

Exchanges Open

The exchanges will be open in the event of a shutdown because the 2010 law relies primarily on mandatory spending, which congressional inaction can’t stop. It’s the budget category used for benefits such as Medicare and Social Security.

Republicans and Democrats began bracing for a shutdown by attempting to affix blame on the other side. It is at least the fourth time in the past three years that lawmakers have taken a budget battle to the brink of a fiscal crisis, each time averting the worst-case scenario just before or after the deadline.

“This has been the Congress of chronic chaos since day one, and this is just another episode,” said Representative Steve Israel, a New York Democrat.

Boehner attempted to avoid this fight, offering a plan earlier in September that wouldn’t have tied the health law, which has become known as Obamacare, to the extension of government funding.

Debt Ceiling

Instead he wanted to have what he called a “whale of a fight” in October over raising the federal debt ceiling. That will be necessary by Oct. 31 at the latest to ensure the government has enough money to pay its bills, according to the Congressional Budget Office.

Tea Party-backed hardliners aligned with Cruz rejected Boehner’s plan, insisting on the decisive battle that is unfolding in the days leading up to Oct. 1, when insurance exchanges open and allow uninsured Americans to enroll for coverage in 2014.

“The American people deserve to have time to see what this monstrosity will do before it is implemented,” said Representative John Culberson, a Texas Republican. “We are simply offering a compromise of a year’s delay.”

The vote early today on the one-year delay was mostly along party lines, with Democrats Mike McIntyre of North Carolina and Jim Matheson of Utah voting yes and Republicans Chris Gibson and Richard Hanna, both of New York, voting no.

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net; Michael C. Bender in Washington at mbender10@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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