Sept. 29 (Bloomberg) -- The U.S. government hurtled toward a partial shutdown for the first time in 17 years on Oct. 1 as Congress deadlocked over Republicans’ insistence on delaying the 2010 health-care law.
Senator Richard Durbin of Illinois, the chamber’s second-ranking Democrat, predicted the government would close in two days after the House voted 231-192 early today to stop many of the Affordable Care Act’s central provisions for one year and tie that to an extension of government funding through Dec. 15.
“Tomorrow, the Senate will come into session, the House position, which is basically the same one they sent us the last time, is going to be rejected again,” Durbin said on CBS’s “Face the Nation.” Asked if he thought a government shutdown would occur, he said, “I’m afraid I do.”
President Barack Obama has said he would veto the House proposal. The past day’s developments raised the prospect of the first government shutdown since 1996, putting as many as 800,000 federal employees out of work starting Tuesday, Oct. 1.
Services such as mail delivery, air traffic control and Social Security payments would continue, even as national parks and Internal Revenue Service call centers would probably close. Even three-fourths of Obama’s staff would be sent home.
Concerns that the budget impasse will hurt economic growth helped push the Standard & Poor’s 500 Index to its first weekly decline since August. The index fell 0.4 percent to 1,691.75 on Sept. 27, and dropped 1.1 percent last week. The rate on 10-year Treasury notes fell three basis points to 2.62 percent.
Texas Republican Senators John Cornyn and Ted Cruz said Senate Majority Leader Harry Reid should call the Senate into session today to consider the latest House proposal.
“There’s no reason the Senate should be home on vacation,” Cruz, who last week spoke on the Senate floor for more than 21 hours to protest the health care law, said today on NBC’s “Meet the Press.” He said he hopes Reid, a Nevada Democrat, “backs away from that ledge.”
The final chance to avert a shutdown could come tomorrow evening, if the Senate turns down the latest House plan, as Democrats promise to do.
At that point, House Speaker John Boehner would have four main choices -- two of which avert a shutdown. He could pass the Senate bill with mostly Democratic votes or attempt a short-term funding extension to keep the government open past Oct. 1, when fiscal year 2014 begins.
The other two options lead to a shutdown. Boehner could add health-law provisions to the spending bill and ask the Senate to go along, which Senate Democratic leaders have said they would reject, or do nothing and wait to see the political fallout.
The latest House bill would leave intact some parts of the health-care law already in effect, such as requirements insurance companies cover people with pre-existing conditions and that family plans cover children up to age 26. The latest bill would allow insurers to deny abortion coverage based on religious or moral objections.
The House measure 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.
The exchanges will be open in the event of a shutdown because the 2010 law relies primarily on mandatory spending, which congressional inaction can’t stop. It’s the budget category used for benefits such as Medicare and Social Security.
Representative Kevin McCarthy, the top House Republican vote counter, said that if the Senate rejects the latest House action, Republican leaders would send back the stopgap measure with “another provision” attached.
The provision would “reflect the House” and would be one “I believe the Senate can accept,” McCarthy of California said on “Fox News Sunday.” He did not specify the options.
The House Republican leadership doesn’t expect to pass a clean spending bill or have enough Republicans who would want to do that, according to a leadership aide who spoke on condition of anonymity to discuss party strategy.
The House probably will amend the spending bill one more time. A likely option would eliminate the government’s contribution to the health insurance of members of Congress and their staff, as a way of testing Democrats’ willingness to make any change to the health law, the aide said.
Republicans and Democrats began bracing for a shutdown by attempting to affix blame on the other side. It is at least the fourth time in the past three years that lawmakers have taken a budget battle to the brink of a fiscal crisis, each time averting the worst-case scenario just before or after the deadline.
“This has been the Congress of chronic chaos since day one, and this is just another episode,” said Representative Steve Israel, a New York Democrat.
Boehner had attempted to avoid this fight, offering a plan earlier in September that wouldn’t have tied the health law, which has become known as Obamacare, to the extension of government funding. Instead he wanted to have what he called a “whale of a fight” in October over raising the federal debt ceiling. That will be necessary by Oct. 31 at the latest to ensure the government has enough money to pay its bills, according to the Congressional Budget Office.
Tea Party-backed hardliners aligned with Cruz rejected Boehner’s plan, insisting on the decisive battle that is unfolding in the days leading up to Oct. 1, when insurance exchanges open and allow uninsured Americans to enroll for coverage in 2014.
“The American people deserve to have time to see what this monstrosity will do before it is implemented,” said Representative John Culberson, a Texas Republican. “We are simply offering a compromise of a year’s delay.”
The vote on the one-year delay was mostly along party lines, with Democrats Mike McIntyre of North Carolina and Jim Matheson of Utah voting yes and Republicans Chris Gibson and Richard Hanna, both of New York, voting no.
Representative Michael Grimm, a New York Republican, said he expected Boehner to eventually seek Democratic votes.
“Do I think Obamacare’s bad policy?” he said. “Yes, but I also think shutting down the government is bad policy. It’s almost like two wrongs don’t make a right. We have to get past this and govern.”
Boehner and House Majority Leader Eric Cantor of Virginia, who often rally the party on the House floor before major votes, didn’t give speeches.
In addition to the Obamacare delay, the House voted 248-174 to attach the repeal of an excise tax on medical devices to the spending bill.
The continued fight over the spending bill makes the outcome of the debt-ceiling debate even less certain. Lawmakers could still be negotiating the end of this debate even as the next one looms.
In a government shutdown, essential operations and programs financed with permanent streams of money would continue. Still, 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.
The House passed a bill 423-0 early today that would make sure that U.S. troops and the civilians and contractors who support them get paid during any shutdown.
Representative Jim McGovern, a Massachusetts Democrat, said Republicans wouldn’t accept the victory they were getting -- keeping current funding levels under across-the-board sequestration that Democrats find unacceptable and damaging.
“I was kind of hoping the grownups in the Republican conference would prevail,” McGovern said.
House Republicans have voted more than 40 times to delay, defund or repeal all or part of the 2010 health-care law, which is designed to expand coverage to at least 30 million people. Some of the narrower proposals became law. The U.S. Supreme Court upheld the law in June 2012.
The new House plan would postpone for one year a central provision of Obamacare: the requirement that almost all individuals obtain insurance.
Tax subsidies scheduled to begin Jan. 1, 2014, would start a year later. The plan would suspend some Obamacare taxes for the 2014 tax year and allow employers with religious objections to opt out of the mandate that most workplace insurance plans include contraceptive coverage.
“It’s not ready,” said Representative Marsha Blackburn, a Tennessee Republican. “We are seeing the impact of delay after delay that is being done by this administration, and what we are saying is it is time, as a fairness issue to the American people -- delay the whole thing.”
That’s different from the Republicans’ initial spending bill, which passed Sept. 20 and would have choked off government funding for Obamacare. The Senate rejected that measure and passed its bill on a 54-44 party-line vote Sept. 27.
Republicans said they hoped their proposal would attract some support among Senate Democrats and bring Democrats into negotiations that they have resisted.
“We continue to be willing to debate these issues in a calm and rational atmosphere,” Reid said in a statement that called the Republican plan “pointless.” He added, “The American people will not be extorted by Tea Party anarchists.”
Democrats said any changes to the health law shouldn’t be made to avert a catastrophe.
“The president has shown that he is willing to improve the health-care law and meet Republicans more than halfway to deal with our fiscal challenges, but he will not do so under threats of a government shutdown that will hurt our economy,” Jay Carney, the White House press secretary, said in a statement yesterday. “Any member of the Republican Party who votes for this bill is voting for a shutdown.”
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