Government Shutdown Nears as Senate Kicks Bill to House

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.

Close
Open
Photographer: Andrew Harrer/Bloomberg

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

The deadlocked U.S. Congress headed into the final hours before the first partial government shutdown in 17 years without any signs of averting widespread furloughs of government workers.

Republicans and Democrats remained at odds over whether to tie any changes to the 2010 Affordable Care Act to a short-term extension of government funding. The Senate voted 54-46 to reject the House’s latest plan, in a party-line move that puts the pressure back on House Republicans, who began meeting at 2 p.m. in the Capitol basement.

House Republicans are planning another volley that would include a delay of the individual mandate to purchase health insurance and eliminate government contributions to lawmakers’ health coverage, said a Republican leadership aide speaking on the condition of anonymity.

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

“This is just blatant extortion,” said Jay Carney, the White House press secretary.

Congress, which has stumbled to fiscal deadlines repeatedly over the past three years, could still find an 11th-hour compromise. Still, lawmakers didn’t sound optimistic about when or how they could reach an agreement and few if any negotiations were occurring.

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

Close
Open
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.

“I don’t even know how to guess,” said Representative James Lankford of Oklahoma, chairman of the Republican Policy Committee.

Stocks Fall

Concern that a shutdown would stunt economic growth sent stocks lower, trimming the biggest quarterly gain since the start of 2012, while Treasuries rallied and the Japanese yen strengthened before a potential shutdown.

The Standard & Poor’s 500 fell 0.4 percent to 1,684.36 at 2:32 p.m. in New York. All 10 main industries in the S&P 500 dropped, with financial, telephone and energy 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 2.63 percent at 12:07 p.m. in New York, according to Bloomberg Bond Trader prices.

In the Senate, Republican leaders were weighing a one-week stopgap measure to keep the government operating, according to a congressional aide. Senate Majority Leader Harry Reid said he would oppose such a plan.

Obama’s Cabinet

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.

Reid, a Nevada Democrat, blamed Republicans for leading the government to the brink of a shutdown. “We’ve done what we’re going to do,” he said as he entered a party meeting this afternoon.

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 would have to wait and the backlog of veterans’ disability claims could increase.

Shutdown Politics

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.

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.”

‘Moment of Truth’

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.

Greg Valliere, chief political analyst for Potomac Research Group Holdings in Washington, told Bloomberg Television today that “a shutdown is not the issue” because default is more important.

“If we even talk about default, if we come within a day or two of default, that’s a terribly negative story for the overall economy,” he said.

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 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 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’

“This strategy won’t succeed,” Senator John McCain, an Arizona Republican, told reporters at the Capitol. “We will not repeal Obamacare, and sooner or later we will resume the functions of government without a repeal of Obamacare and without changing it.”

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.

The latest House plan leaves intact some parts of the health-care law already in effect, such as requirements that insurers cover pre-existing conditions and that family plans cover children to age 26.

The House added language that would let insurers deny abortion coverage based on religious or moral objections. The House measure also 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.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.