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Government Nears Shutdown as Obama Rejects Paying Ransom

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. 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. Photographer: Andrew Harrer/Bloomberg

Sept. 30 (Bloomberg) -- The U.S. government sped toward a partial shutdown at midnight, as lawmakers lobbed dead-end proposals across the Capitol and President Barack Obama made last-minute phone calls to the top four congressional leaders.

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 Obama.

“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 partisan confrontation showed few signs of ending as the Senate was set to reject the latest House plan within an hour of the vote, said Senate Majority Leader Harry Reid. Barring a last-minute compromise or concession, the U.S. appears headed for its first shutdown in 17 years.

Each party tried to pin blame on the other. 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

Hours after talking by phone with Obama, House Speaker John Boehner urged the House to pass its latest plan, which 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.

‘Not About’

“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.”

It’s not clear what Boehner will do next.

Oklahoma Republican James Lankford said the House is prepared to send another volley across the Capitol. Boehner has kept his plan for the next version “close to the vest,” Lankford said, adding that the House is prepared to stay in session all night.

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 Calls

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, said a White House official speaking on condition of anonymity. There were few signs of progress toward an agreement.

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.

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.

Economic Growth

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.

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.

‘Be Extorted’

“We won’t be extorted now,” said Senator Charles Schumer, a New York Democrat. “We won’t be extorted two weeks from now. We won’t be extorted in December.”

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 passed a separate bill today 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 Implications

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.”

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.

Shifting Blame

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.

“It’s in Harry Reid’s court right now,” said Representative Pat Tiberi, an Ohio Republican. “We’ve passed multiple attempts to keep the government open and get them to come to the table on the health care bill.”

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.

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.

Boehner, Cantor

Earlier this month, Boehner of Ohio 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 upsets 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 U.S. debt ceiling.

Representative Devin Nunes of California said opposition to the latest leadership plan was coming mostly from Republicans who want to defund the health law, not just delay some pieces.

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.

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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