Government Nears Shutdown as Parties Reject Budget Plans

Photographer: Andrew Harrer/Bloomberg

Visitors walk through the U.S. Capitol Rotunda in Washington, D.C., on Sept. 30, 2013. Close

Visitors walk through the U.S. Capitol Rotunda in Washington, D.C., on Sept. 30, 2013.

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Photographer: Andrew Harrer/Bloomberg

Visitors walk through the U.S. Capitol Rotunda in Washington, D.C., on Sept. 30, 2013.

Both parties in Congress dug in deeper hours before a midnight deadline to keep the government open, lobbing dead-end proposals and insults across the Capitol as the first partial shutdown in 17 years looked inevitable.

The Senate voted 54-46 to reject the House’s latest plan, in a move that puts the pressure back on House Republicans, who are insisting on tying changes in the 2010 Affordable Care Act to a short-term extension of government funding after tonight.

“With a bully, you can’t let them slap you around,” said Senate Majority Leader Harry Reid, a Nevada Democrat. “Because if they slap you around today, they’ll slap you around five or six times tomorrow.”

Senate Republicans floated the idea to extend by one week the funding deadline to avert a shutdown. Reid said no. Democrats urged House Speaker John Boehner to allow a vote on a spending bill without conditions.

“That’s not going to happen,” Boehner said.

Instead, House Republican leaders are planning another volley today that Reid has already rejected.

The Republican proposal would include a delay of the individual mandate to buy health insurance and end government contributions to coverage for lawmakers and congressional staff.

Photographer: Win McNamee/Getty Images

U.S. Senate Majority Leader Harry Reid, a Democrat from Nevada, blamed Republicans for leading the government to the brink of a shutdown. Close

U.S. Senate Majority Leader Harry Reid, a Democrat from Nevada, blamed Republicans for... Read More

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Photographer: Win McNamee/Getty Images

U.S. Senate Majority Leader Harry Reid, a Democrat from Nevada, blamed Republicans for leading the government to the brink of a shutdown.

It already sparked opposition from Republican lawmakers who want to accept a bill without conditions and from party members who insist on defunding the health law. It was unclear whether the plan could pass.

Stocks Fall

Concern that a shutdown would stunt economic growth sent stocks lower, trimming the biggest quarterly gain since the start of 2012, and the yield on 10-year Treasury notes traded at an almost seven-week low.

The Standard & Poor’s 500 fell 0.6 percent to 1,681.55 at 4:19 p.m. in New York. All 10 main industries in the S&P 500 dropped, with consumer goods, oil and gas and financial shares falling the most.

Crude oil traded near its lowest level in three months. West Texas Intermediate oil fell as much as 1.8 percent. Treasury 10-year note yields were little changed at 2.62 percent at 2:41 p.m. in New York, according to Bloomberg Bond Trader prices, after earlier reaching the lowest point since Aug. 12.

Fiscal Deadlines

Congress, which has stumbled to fiscal deadlines repeatedly in the past three years, could still find an 11th-hour compromise. Lawmakers didn’t sound optimistic about reaching an agreement and few if any talks are occurring.

President Barack Obama said he’s “not at all resigned” to a shutdown and will speak with congressional leaders today.

Obama will meet with his cabinet today as agencies prepare for a shutdown and he plans to reiterate to reporters that he won’t give in to Republican demands over the health law, according to an administration official who asked for anonymity to discuss strategy.

Hanging in the balance are 800,000 federal workers who would be sent home if Congress fails to pass a stopgap spending bill before funding expires tonight.

“We won’t be extorted now,” said Senator Charles Schumer, a New York Democrat. “We won’t be extorted two weeks from now. We won’t be extorted in December.”

The fallout in U.S. government services would be far-reaching: national parks and Internal Revenue Service call centers probably would close. Those wanting to renew passports may have to wait and the backlog of veterans’ disability claims might increase.

Military Pay

The Senate passed a separate bill today to ensure that U.S. troops along with some civilians and contractors are paid if the government shuts down. The House unanimously passed the plan early yesterday and it now heads to Obama.

The political implications are much less clear. Democrats are painting Republicans as obstructionists who are trying to undo a law passed by Congress, upheld by the Supreme Court and ratified by Obama’s re-election in 2012. Republicans say they are trying to save Americans from the effects of the law, known as Obamacare, and that Democrats won’t negotiate.

“I don’t want to shut the government down but I also want to protect my constituents from this law,” said Representative Richard Hudson, a first-term Republican from North Carolina. “So I’ll do whatever it takes.”

Bloomberg Poll

A Bloomberg National poll conducted Sept. 20-23 shows Americans narrowly blame Republicans for what’s gone wrong in Washington, just as they did when the government closed in 1995 and 1996 -- two of the 17 times U.S. funding stopped since 1977. A CNN/ORC International poll conducted Sept. 27-29 and released today said 46 percent of respondents would blame congressional Republicans for a shutdown, while 36 percent would say the president was responsible.

“There aren’t any Republicans talking about shutdown,” Senator John Thune, a South Dakota Republican, told Bloomberg Television’s Peter Cook. “We want to fund the government.”

House Republicans said they’ll respond by again asking for changes to Obamacare and spent yesterday trying to shift blame for a shutdown to the Democrats.

In a government shutdown, essential operations and programs with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments.

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.

Republican Rule

Because Republicans hold a majority of seats in the House, they decide what goes into the bills that are brought up for a vote. A faction that opposes compromise with the Democrats has been pushing its leaders to keep fighting rather than bring a bill to the floor that both parties could accept.

Earlier this month, Boehner of Ohio and Majority Leader Eric Cantor of Virginia initially supported a plan that would have let the Senate send a bill without policy riders straight to Obama.

Now, without enough Republican support, the only way to pass such a bill is with Democrats voting “yes.” That scenario poses a risk for Republican leaders: If their decision angers a large bloc of their membership, the next time the top jobs come up for a vote they could be pushed out.

That bloc of hard-liners could also stall other legislation, including the need next month to raise the $16.7 trillion federal debt ceiling.

‘Won’t Succeed’

“All we’re doing is leading ourselves into a government shutdown for no reason,” said Representative Peter King of New York, who said he would oppose the latest plan. “Whether or not we’re responsible, we’re going to get blamed for it.”

Representative Devin Nunes of California said opposition to the latest leadership plan is coming mostly from Republicans who want to defund the health law, not just delay some pieces. Republican leaders will talk more with that group of hard-liners later today, he said.

The House plan being considered by the Senate would authorize 10 weeks of spending starting tomorrow only if much of the health law is delayed for a year. While House Republicans backed off defunding Obamacare in favor of delaying most of its provisions, Democrats haven’t budged in their support for the health law.

Representative Nancy Pelosi, the House Democratic leader, said she called Boehner earlier today to offer the Democratic votes needed to pass the Senate’s bill, noting that the government would be funded at a $986 billion annual rate that Democrats oppose.

“That’s our compromise,” she said. “That’s our offer.”

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

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

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