U.S. Shutdown Enters First Weekend as Neither Side Budges

The partial shutdown of the U.S. government lumbered into its fifth day with no signs of a breakthrough, as House Speaker John Boehner insisted again that Democrats make concessions on the 2010 Affordable Care Act.

After a private meeting of House Republicans yesterday, Boehner criticized President Barack Obama’s refusal to negotiate on any changes to the health law.

“When we have a crisis like we’re in the middle of this week,” Boehner said, “the American people expect their leaders to sit down and try to resolve their differences.”

The shutdown has furloughed about 800,000 federal employees and is becoming a prolonged deadlock that is merging with the debate over raising the U.S. debt ceiling.

Obama repeated his position yesterday that Boehner should buck the majority of House Republicans and a vote on a short-term spending bill without policy conditions.

“If Speaker Boehner will simply allow a vote to take place, we can end this shutdown,” Obama said during a lunchtime walk to a sandwich shop near the White House. “And a whole bunch of families not just here in Washington but all across the country will have the certainty that paychecks will be coming, that they’ll be able to make their mortgage, that they’ll be able to pay their expenses and they’ll be able to look after their families.”

Stocks Rise

U.S. stocks rose on optimism lawmakers would come to an agreement on the shutdown and the debt ceiling, after BlackRock Inc.’s Laurence D. Fink and Pacific Investment Management Co.’s Bill Gross said they expect that the standoff will be resolved without a debt default.

The Standard & Poor’s 500 Index climbed 0.7 percent yesterday in New York. Ten-year Treasury yields rose from almost a seven-week low, increasing four basis points to 2.65 percent, according to Bloomberg Bond Trader prices.

The effects of the shutdown continued to ripple through the government and the country.

The Bureau of Labor Statistics didn’t release yesterday’s monthly report on unemployment, repeating what it did in the 1996 shutdown. U.S. Trade Representative Michael Froman said in a statement that the government wouldn’t be able to participate in next week’s second round of negotiations on the Trans-Atlantic Trade and Investment Partnership in Brussels.

Lockheed Furloughs

Lockheed Martin Corp., the largest U.S. government contractor, said it will furlough about 3,000 employees on Oct. 7 because of effects of the shutdown, including the inability of workers to get to their jobs in shuttered government facilities and a halt to government inspections.

Other government services continued, including Social Security benefits, mail delivery and air traffic control.

Republicans’ most recent proposal for opening the government would postpone for one year the mandate for individuals to purchase health insurance, mirroring the delay the administration granted to employers. It would also remove employer contributions toward health insurance for members of Congress, their staffs and political appointees.

Unlike past fiscal feuds, this dispute is more about the health law and less about the amount of spending. The U.S. budget deficit in June was 4.2 percent of gross domestic product, down from 10.1 percent in February 2010 and the narrowest since November 2008, when Obama was elected to his first term, according to data compiled by Bloomberg from the Treasury Department and the Bureau of Economic Analysis.

‘Rolling Over’

Representative John Fleming, a Louisiana Republican, said Boehner told members yesterday that he had no intention of “rolling over” to Democrats’ demands for spending and debt-limit bills without policy conditions. He said his constituents aren’t concerned about the shutdown.

“All they want to talk about was the drag of Obamacare,” Fleming told reporters. “I don’t think many of my constituents even know that there is a shutdown, or even care.”

House Democrats will attempt to use a procedural move known as a discharge petition to force a vote on a bill to end the shutdown without policy conditions.

The move is a long shot. It wouldn’t result in a vote until Oct. 14 and would require Republicans who support the policy to break with Boehner in ways they haven’t on other procedural matters.

House Republicans continued their strategy of passing bills to fund parts of the government, such as national parks, weather monitoring and infant nutrition.

Retroactive Pay

Majority Leader Eric Cantor, a Virginia Republican, said the House will consider a measure to give retroactive pay to furloughed federal employees, and the White House said it would support such a bill.

Republicans’ best hope was to keep sending piecemeal bills and wait for public sentiment to change, said Representative Hal Rogers of Kentucky, chairman of the House Appropriations Committee.

“The public is going to finally say to the president, ‘Look, at least sit down and talk,’” he said.

The White House has threatened to veto the piecemeal bills. Giving in now would only embolden Republicans to seek more concessions, said Senator Charles Schumer, a New York Democrat.

“The hope is maybe once the Tea Party has realized it’s not getting its way on shutting down the government, that they won’t try the same stunt on the debt ceiling,” Schumer said. “If they do, by the way, the heat on them will be much, much greater than it is now.”

Borrowing Authority

The U.S. will run out of borrowing authority on Oct. 17 and will have $30 billion in cash after that. The country would be unable to pay all its bills, including benefits, salaries and interest, sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Boehner said he doesn’t want the U.S. to default on its debt. He also said he will reject Obama’s call for a debt-limit increase free of policy conditions.

“If we’re going to raise the amount of money we can borrow, we ought to do something about our spending problem and the lack of economic growth in our country,” he said.

Last month, Boehner outlined a debt-limit strategy that included lighter regulations, cuts in entitlement programs and approval of TransCanada Corp.’s Keystone XL pipeline.

The outline added means-testing in Medicare, changing malpractice law and eliminating social services block grants. Also being considered was a proposal to eliminate a requirement that gives regulators authority to seize and dismantle financial firms if their failure could damage the stability of the U.S. financial system.

(Corrects figure on budget deficit as a percentage of GDP in 14th paragraph. For more news on the shutdown, see EXT2.)
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