Government Shutdown Nearer as House Republicans Huddle

The U.S. Congress headed into the final hours before the first partial government shutdown in 17 years with neither side budging or negotiating before a midnight deadline.

House Republicans, led by Speaker John Boehner, plan to meet at 2 p.m. in the Capitol basement to plan their next move. The House is urging the Senate to link a delay of the 2010 Affordable Care Act to a short-term extension of government funding. Senate Democrats, who are also meeting today, plan to strip that language, leaving the House only a few hours to act.

President Barack Obama said he’s “not at all resigned” to a shutdown and will speak with congressional leaders today.

“We are the foundation of the world economy and the world financial system and our currency is the reserve currency of the world. We don’t mess with that,” Obama said. “We certainly don’t allow domestic policy differences on issues that are unrelated to the budget to endanger not only our economy but the world economy.”

House Republicans probably won’t accept Democrats’ demand for a spending bill without policy riders, said a Republican leadership aide. Options include eliminating health insurance subsidies for lawmakers and staff, delaying the individual mandate to buy health insurance and delaying an advisory board set to recommend cost savings under Medicare, the aide said.

In the Senate, Republican leaders were weighing a one-week stopgap measure to keep the government operating, according to a congressional aide. Senate Majority Leader Harry Reid said he would oppose such a plan.

Stocks Fall

Concern that a shutdown would stunt economic growth sent stocks lower today, trimming the biggest quarterly gain since the start of 2012, while Treasuries rallied and the Japanese yen strengthened before a potential shutdown.

The Standard & Poor’s 500 fell 0.5 percent to 1,683.17 at 1:57 p.m. in New York. All 10 main industries in the S&P 500 dropped, with financial, telephone and energy shares falling the most.

Crude oil traded near its lowest level in three months. West Texas Intermediate oil fell as much as 1.8 percent. Treasury 10-year note yields were little changed at 2.63 percent at 12:07 p.m. in New York, according to Bloomberg Bond Trader prices.

Cabinet Meeting

Obama will meet with his cabinet today as agencies prepare for a shutdown and he plans to reiterate to reporters that he won’t give in to Republican demands over the health law, according to an administration official who asked for anonymity to discuss strategy. 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 tonight.

Reid, a Nevada Democrat, blamed Republicans for leading the government to the brink of a shutdown. “We’ve done what we’re going to do,” he said as he entered a party meeting this afternoon.

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 would have to wait and the backlog of veterans’ disability claims could increase.

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, known as Obamacare, and that Democrats won’t negotiate.

Public Opinion

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.

“There aren’t any Republicans talking about shutdown,” Senator John Thune, a South Dakota Republican, told Bloomberg Television’s Peter Cook. “We want to fund the government.”

The Senate convenes at 2 p.m. today and shortly thereafter is set to reject the House’s latest plan, which passed on a nearly party-line vote early yesterday.

‘Moment of Truth’

“Then it’ll be the moment of truth,” Representative Gerry Connolly, a Virginia Democrat, said today on MSNBC.

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.

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.

Greg Valliere, chief political analyst for Potomac Research Group Holdings in Washington, told Bloomberg Television today that “a shutdown is not the issue” because default is more important.

“If we even talk about default, if we come within a day or two of default, that’s a terribly negative story for the overall economy,” he said.

Republican Rule

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.

Without enough Republican support, the only way to pass a bill is with Democrats voting “yes.” That scenario poses a risk for Republican leaders: If their decision angers 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 federal debt ceiling.

The House plan being considered by the Senate would authorize 10 weeks of spending starting tomorrow only if much of the health law is delayed for a year. 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.

Health Law

The latest House plan leaves intact some parts of the health-care law already in effect, such as requirements that insurers cover pre-existing conditions and that family plans cover children to age 26.

The House added language that would let insurers deny abortion coverage based on religious or moral objections. The House measure also 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.

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