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Midnight Government Shutdown Nears as Congress Dead Ends

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Photographer: Andrew Harrer/Bloomberg

The U.S. flag flies at the U.S. Capitol in Washington, D.C.

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Photographer: Andrew Harrer/Bloomberg

The U.S. flag flies at the U.S. Capitol in Washington, D.C. Close

The U.S. flag flies at the U.S. Capitol in Washington, D.C.

Photographer: Andrew Harrer/Bloomberg

House Speaker John Boehner, a Republican from Ohio, center, walks out of the House chamber after voting at the U.S. Capitol in Washington, D.C. on Sept. 30, 2013. Close

House Speaker John Boehner, a Republican from Ohio, center, walks out of the House chamber after voting at the U.S.... Read More

Photographer: Andrew Harrer/Bloomberg

The U.S. Capitol stands in Washington, D.C., on Sept. 27, 2013. House Speaker John Boehner's plan to avert a shutdown by shifting to a debt-ceiling fight ran into opposition from some Republicans in another setback for efforts to keep the U.S. government operating after Sept. 30. Close

The U.S. Capitol stands in Washington, D.C., on Sept. 27, 2013. House Speaker John Boehner's plan to avert a shutdown... Read More

Photographer: Andrew Harrer/Bloomberg

Senator Harry Reid, a Democrat from Nevada and Senate majority leader, speaks during a news conference in Washington, D.C. on Sept. 30, 2013. Close

Senator Harry Reid, a Democrat from Nevada and Senate majority leader, speaks during a news conference in Washington,... Read More

The U.S. government sped toward a partial shutdown at midnight, as lawmakers lobbed dead-end spending proposals across the Capitol and a shutdown became almost unavoidable.

The partisan confrontation showed no signs of ending. Barring a last-minute compromise or concession, the U.S. is headed for its first shutdown in 17 years.

Senate Majority Leader Harry Reid said at about 11 p.m. in Washington that his chamber won’t start formal negotiations with the House until Republicans accept the Senate bill.

“A shutdown is unavoidable,” said Representative Jim McGovern, a Massachusetts Democrat.

The House voted 228-201 to pass its third version of a short-term extension of government funding in the past 10 days. Each attempt linked averting a shutdown to major changes to the 2010 Affordable Care Act, and each drew veto threats from President Barack Obama.

About an hour later, the Senate rejected that plan on a 54-46 vote, putting pressure on House Speaker John Boehner and the Republicans.

“They’ve lost their minds,” said Reid, a Nevada Democrat. “They keep trying to do the same thing over and over again.”

The House will seek a conference committee with the Senate, said Representative Pete Sessions, chairman of the House Rules Committee. That won’t yield a deal in time to prevent at least a temporary shutdown.

OMB Deadline

Republicans said Democrats were unwilling to negotiate and Democrats said the House was trying to extort policy changes on a plan that would, at most, keep government open through Dec. 15.

The White House Office of Management and Budget, facing its own procedural deadline, must determine by 11:30 p.m. tonight Washington time whether to instruct agencies to begin implementing their shutdown plans after midnight, according to an Obama administration official familiar with the planning who asked not to be identified.

Hours after talking by phone with Obama, Boehner urged the House to pass its latest plan. It delays by a year the mandate that uninsured individuals buy health coverage and prevents the government from making contributions to the health care of lawmakers, their staffs and political appointees.

“This is not about me,” the Ohio Republican said on the House floor. “And it’s not about Republicans here in Congress. It’s about fairness for the American people.”

Party Strategy

Even as Republicans such as Representative Peter King of New York complained about the party’s strategy, they were relatively united. On the latest proposal, 12 Republicans voted no; nine Democrats voted for the plan.

Obama called Boehner this evening and they spoke for almost 10 minutes, Brendan Buck, a spokesman for the speaker, said in a statement. Obama also spoke to the other top three leaders in Congress, the White House said in a statement. There were few signs of progress toward an agreement.

“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 today. “Time’s running out.”

The Senate voted 54-46, along party lines, earlier today to reject the House’s previous plan, in a move that put pressure on House Republicans, who are insisting on tying changes in the 2010 Affordable Care Act, now known as Obamacare, to a short-term extension of government funding after tonight.

Floated Idea

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

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

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.

“A shutdown will have a very real economic impact on real people, right away,” Obama said.

One-Year Delay

The Republican proposal includes a one-year delay of the individual mandate to buy health insurance and end government contributions to coverage for lawmakers and congressional staff.

Representative Nancy Pelosi, the House Democratic leader, compared Republicans’ focus on the health law to “hounds baying at the moon” and said that she was willing to accept government funding levels she opposes.

“You and that attitude are a luxury this country cannot afford,” said Pelosi, a California Democrat.

Congress, which has stumbled to fiscal deadlines repeatedly in the past three years, could still find an 11th-hour compromise. 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.

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.

The Senate cleared a separate bill, later signed by Obama, 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.

Political Fallout

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 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.”

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.

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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