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Government Shutdown Begins as Deadlocked Congress Flails

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A U.S. Park Ranger and a U.S. Park Policeman close the Martin Luther King Jr. Memorial in Washington on October 1, 2013.

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Photographer: Shawn Thew/EPA

A U.S. Park Ranger and a U.S. Park Policeman close the Martin Luther King Jr. Memorial in Washington on October 1, 2013. Close

A U.S. Park Ranger and a U.S. Park Policeman close the Martin Luther King Jr. Memorial in Washington on October 1, 2013.

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A clock reads midnight inside National Statuary Hall at the U.S. Capitol in Washington, D.C. on Oct. 1, 2013.

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House Speaker John Boehner, a Republican from Ohio, center, holds a news conference with House Majority Leader Eric Cantor, a Republican from Virginia, center left, Majority Whip Kevin McCarthy, a Republican from California, and Representative Cathy McMorris Rodgers, a Republican from Washington, at the U.S. Capitol in Washington, D.C. on Oct. 1, 2013. Close

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Members of the media stand outside House Speaker John Boehner's office at the U.S. Capitol in Washington, D.C. on Sept. 30, 2013. Close

Members of the media stand outside House Speaker John Boehner's office at the U.S. Capitol in Washington, D.C. on Sept. 30, 2013.

The U.S. government began its first partial shutdown in 17 years, idling as many as 800,000 federal employees, closing national parks and halting some services after Congress failed to break a partisan deadlock by a midnight deadline.

Congressional leaders have scheduled no further negotiations on spending legislation, raising concerns among some lawmakers that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.

Many federal employees reporting to work today will be given a few hours to conduct 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 President Barack Obama’s Affordable Care Act, the plan opposed by many Republicans.

Markets took the government shutdown in stride. Global stocks rose after the biggest decline in a month and Treasuries fell on speculation any economic effect from it will be limited. The dollar weakened. The Bloomberg U.S. Dollar Index dropped 0.2 percent, crude fluctuated and corporate bond risk fell for the first time in five days.

Public Opposition

Still, the shutdown will be broadly unpopular with the public, according to a national poll released today by Quinnipiac University. By 72 percent to 22 percent, Americans oppose Congress “shutting down major activities of the federal government” as a way to stop the health-care law, known as Obamacare, from going into effect, the national survey found.

The poll, conducted Sept. 23-29, showed voters disapprove of the job being done by congressional Republicans 74 percent-17 percent -- their lowest score ever -- while disapproving of Democrats’ job 60 percent-32 percent. Obama got a negative 45 percent-49 percent overall job approval rating, versus his 46 percent-48 percent score Aug. 2, according to the survey, which has a margin of error of plus or minus 2.5 percentage points.

“Americans are certainly not in love with Obamacare, but they reject decisively the claim by congressional Republicans that it is so bad that it’s worth closing down the government to stop it,” said Peter Brown, assistant director of the Hamden, Connecticut-based polling institute.

Economic Cost

A partial federal government shutdown would cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc. (IHS) That’s a fraction of the country’s $15.7 trillion economy, and the effects probably will grow over time as consumers and businesses defer purchases and expansion plans.

The next step on a spending measure was uncertain today. Representative Tom Cole, an Oklahoma Republican, said on MSNBC’s “Morning Joe” that House Republicans want to go to a conference with the Democratic-led Senate to negotiate.

Republican Representative Darrell Issa of California said Congress should agree on an interim spending deal to give 10 days “even 30 days if that was necessary” to settle differences over curtailing parts of Obamacare.

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.

Medical Devices

“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.”

The chances of a last-minute deal -- seen so often in past fiscal fights -- evaporated shortly before midnight as the House stood firm on its call to delay major parts ofObama’s health-care law for a year. Senate Democrats were equally firm in refusing to concede and planned a morning vote to reject the House’s call for formal talks.

“It is embarrassing that these people who were elected to represent the country are representing the Tea Party,” Senate Majority Leader Harry Reid, a Nevada Democrat, said after midnight. “This is an unnecessary blow to America.”

House Speaker John Boehner, speaking after 1 a.m. in Washington, called on Senate Democrats to come to the negotiating table.

“Let’s resolve our differences,” Boehner, an Ohio Republican, told reporters. “The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare.”

No ‘Ransom’

Obama said yesterday he wouldn’t negotiate under the threat of a government shutdown or a default on the U.S. debt.

“You don’t get to extract a ransom for doing your job, for doing what you’re supposed to be doing anyway or just because there’s a law there you don’t like,” Obama said at the White House yesterday.

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. In Korea, the finance ministry said it could make investors more risk averse and fuel capital outflows from emerging markets.

IRS, EPA

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. 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.

The shutdown comes on the first day of enrollment in the exchanges mandated under the health-care law at the heart of the fight. Enrollment will continue today even as the government shuts down, because it’s paid for out of mandatory funding not affected by the lapse, U.S. officials said.

In the end, the final hours before the shutdown were marked by a combination of legislative procedure and partisan vitriol. House Republicans said they would appoint members to a committee meant to negotiate a compromise between the Republican and Democratic positions -- something several rounds of votes didn’t accomplish.

Uncertain Timetable

“I’d be surprised if it went for weeks,” said Senator Bob Casey, a Pennsylvania Democrat. “But I don’t think it’s just going to resolve itself in a day or two.”

Before midnight, the U.S. Office of Management and Budget issued guidance to agencies, telling them how to go forward when money ran out at midnight in Washington.

Boehner, who said he didn’t want a shutdown, kept bringing bills backed by hard-liners in his party to the floor for votes. Twice yesterday, the House voted to send a bill delaying Obamacare to the Senate. Twice, the Senate rejected the House plans.

Republicans remained divided between a group that says the party’s confrontational strategy is doomed and a faction railing against Obama’s refusal to negotiate.

“I would like see some road in which Barack Obama is actually participating in the process,” said Representative Tim Huelskamp, a Kansas Republican.

At Loggerheads

Congress and Obama have been at loggerheads on fiscal policy since Republicans won control of the House. They took several disputes to the brink, including a potential government shutdown in April 2011, the debt ceiling in August 2011 and the expiration of tax cuts in December 2012.

In each case, lawmakers reached an agreement to prevent the worst possible outcome. Most recently, the House passed a tax bill Jan. 1, hours after income tax rate increases took effect.

Boehner and House Majority Leader Eric Cantor, a Virginia Republican, tried to avoid this fight, offering a first proposal last month that would have let the Senate send a spending bill without conditions right to Obama.

They faced an uprising from Republicans, urged on by Senator Ted Cruz of Texas, who insisted on language that would defund Obamacare.

Scaled Back

The House scaled back its demands twice, each time running into party-line objections from Senate Democrats and Obama, who increasingly saw the spending bill as a prelude to the debt-ceiling negotiations.

The House’s final volley, passed last night, would have delayed for one year the mandate that uninsured individuals buy health coverage and would have ended government contributions to the health insurance of lawmakers, congressional staff members and political appointees.

Some strategists expect the shutdown to drive both parties deeper into their respective fighting corners as they assess the economic and political fallout, hardening positions at least temporarily before a resolution can be reached.

“It’s clear that there are rising concerns within the House Republican caucus about how all of this is being handled, but I believe that for right now, the insurgents have the upper hand and they’re not going to go away without a fight,” said Democratic communications consultant Jim Manley of Washington-based Quinn Gillespie & Associates LLC, a former top aide to Reid.

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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