Government Furloughs Begin Due to Congressional Impasse

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A U.S. Park Police Officer closes the Lincoln Memorial on the National Mall October 1, 2013 in Washington, DC. Close

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Photographer: Brendan Smialowski/AFP via Getty Images

A U.S. Park Police Officer closes the Lincoln Memorial on the National Mall October 1, 2013 in Washington, DC.

The real-life effects of the political fight in Congress over President Barack Obama’s health law hit home today as the government furloughed about 800,000 employees and shuttered offices, parks and museums.

The U.S. Senate this morning rejected the latest version of a House spending bill on a straight party-line vote. It was the third time in two days that the Senate has rebuffed Republican stopgap spending legislation that included provisions to curtail Obama’s Affordable Care Act.

No path out of the shutdown was immediately clear. Neither the House nor the Senate has announced further budget votes, and no signs of behind-the-scenes negotiations to break the stalemate were evident.

“One faction of one party in one house of Congress in one branch of government shut down major parts of the government, all because they didn’t like one law,” Obama said at the White House today. “The longer this shutdown continues, the worse the effects will be. More families will be hurt. More businesses will be harmed.”

House Republicans are meeting at the Capitol as the party remained divided between hard-liners insisting on continued confrontation and at least six others who say they would support a spending bill to end the shutdown without health-law conditions attached.

Republican lawmakers are “waiting for Senate Democrats to join us,” House Majority Leader Eric Cantor of Virginia told reporters. “This silliness that is caused by the unwillingness to talk is what we’re trying to avoid.”

Stocks Rise

So far, there was little external pressure to reach a deal. U.S. stocks rose, after the Standard & Poor’s 500 Index (SPX) fell to a three-week low, as investors speculated the economic effects of the partial government shutdown would be limited.

The S&P 500 rose 0.8 percent to 1,694.68 at 1:17 p.m. in New York, after declining yesterday for the seventh time in the past eight sessions. Treasury 10-year yields rose three basis points, or 0.03 percentage points, to 2.64 percent at 12:36 p.m.

Senator Lindsey Graham, a South Carolina Republican, said neither side has a sustainable position. Republicans won’t be able to defund or delay the health-care law, known as Obamacare, while the president and his Democrats will have to agree to some changes to the law, Graham said in an interview.

‘Lion’s Share’

“We’ll get the lion’s share of the blame for shutting the government down, right or wrong, but they’re going to feel the pain pretty soon for not talking,” Graham said.

The government’s first partial shutdown in 17 years may cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc. (IHS) Though that’s a fraction of the country’s $15.7 trillion economy, the effects may grow over time as consumers and businesses defer purchases and expansion plans.

Voters disapprove of the job being done by congressional Republicans by 74 percent to 17 percent -- their lowest score ever -- while disapproving of Democrats’ job 60 percent to 32 percent, according to a national poll released today by Quinnipiac University. Obama got a 45 percent to 49 percent overall job approval rating, versus his 46 percent to 48 percent score Aug. 2, according to the survey, which has a margin of error of plus or minus 2.5 percentage points.

“Voters are angry at almost everyone in Washington over their inability to keep the trains running, but they are madder at the Republicans than the Democrats,” said Peter A. Brown, assistant director of the Hamden, Connecticut-based polling institute.

Health Law

Both sides jockeyed today to place blame on the other side. Democrats said the nation was being taken hostage by the Republicans’ Tea Party faction, while the Republicans blamed Senate Democrats and Obama for being unwilling to negotiate over measure to delay or curtail the Affordable Care Act.

“Every piece of legislation the House sent over would have kept the government from shutting down,” Senate Minority Leader Mitch McConnell of Kentucky said following the morning vote, adding that each House proposal was more of a compromise than the previous proposal. Democrats “seem completely opposed to negotiation or compromise” on Obamacare even at the cost of a shutdown, he said.

Senate Majority Leader Harry Reid, a Nevada Democrat, said Republicans are “fixated” on Obamacare and that “Speaker Boehner and his band of Tea Party radicals have done the unthinkable: They’ve shut down the government.”

Debt Ceiling

An absence of further congressional negotiations on spending legislation raised concerns that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever government default.

White House spokesman Jay Carney said today on MSNBC that the shutdown may be “a preview” of what may happen after Oct. 17, when the government breaches the debt ceiling. A U.S. default would be “catastrophic without question” for the economy, he said.

Republican Representative Paul Ryan of Wisconsin, chairman of the House Budget Committee, said he wanted a broader budget agreement as part of legislation that would raise the debt limit.

“Most budget agreements in the past have always involved debt-limit increases,” he said. “We think that’s the forcing mechanism.”

Federal Workers

Many federal employees reporting to work were given a few hours to complete shutdown activities, such as securing files and posting closed signs and phone messages, before being sent home until Congress passes a spending measure for the new fiscal year, which began today.

One government operation that will continue is the start of enrollment in the health-insurance exchanges mandated under Obama’s Affordable Care Act, the plan opposed by many Republicans. That’s because it’s paid by mandatory funding unaffected by the lapse.

“It is settled and it is here to stay,” Obama said.

Senator Richard Durbin of Illinois, the chamber’s second-ranking Democrat, said he was willing to look at one aspect of the health-care law.

“We can work out something, I believe, on the medical device tax,” Durbin said on CNN. “That’s one thing the Republicans want to talk about; let’s sit down and put it on the table.”

Democrats have insisted that Congress make up the estimated $30 billion revenue loss from repealing the 2.3 percent excise tax.

‘Good Fight’

One Republican representative, Scott Rigell, said in a Twitter message today that “we fought the good fight. Time for a clean CR.” Rigell was elected in a Virginia district that voted for Obama last year. Representative Patrick Meehan, a Pennsylvania Republican, also said he supported a spending bill, known as a continuing resolution, without conditions.

Abroad, U.K. Prime Minister David Cameron, whose Conservative Party is a traditional Republican ally, said the U.S. political crisis poses a threat to global growth.

“It is a risk to the world economy if the U.S. can’t properly sort out its spending plans,” Cameron told the BBC in Manchester today.

During the partial government shutdown, many essential government operations will cease. Internal Revenue Service call centers will close and more than 90 percent of Environmental Protection Agency workers will stay home. National parks and museums will be shuttered.

Other services will continue uninterrupted even if workers go unpaid. Social Security and Medicare benefits will be paid. U.S. troops will remain at their posts around the world and will be paid under a bill Obama signed yesterday. Air-traffic controllers and airport security screeners will keep working.

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 Tallahassee at mbender10@bloomberg.net

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

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