Since 0:01 this Tuesday, the United States does not have a budget. The federal government is paralyzed, the “shutdown”. What impact for Obama, Americans, the economy?
• The “Shutdown”, what is it?
Literally, “shutdown” in English means closure. The term means the cessation of operation of many federal agencies and services in the United States. This paralysis of the U.S. government has officially launched this Tuesday, October 1, the first day of the fiscal year, in Washington 0:01 or 6:01 in Paris.
• How the U.S. did they get there?
The “shutdown” is under U.S. law if the budget is not passed by Congress. This is what just happened. The House of Representatives (the lower house of Congress), where the Republican party majority in the elections of November 2010, Sunday adopted a draft budget that would allow the government to pay its bills until December 15. This text requires the postponement of one year from the entry into force of the Health Act, the ” Obamacare “emblematic reform Democratic president, hated by Republicans. For the White House, no question of delay Obamacare.
The Senate Democratic majority, rejected Monday evening the bill in the House. The fiscal year that starts October 1 in the United States, has begun without a budget.
• Y-Has there been any Historical Precedent?
The longest government paralysis and the most recent was held in 1995 and 1996, under the first term of Bill Clinton , during the vote on the 1996 budget. The House Republican majority had voted a text limiting health spending, which had suffered a veto of Bill Clinton. At the time, the financing of Medicare health coverage-over 65 – which was the cause of the budget crisis.
Blocking October 1 was avoided in extremis with a temporary extension of credit. A new appointment was set for November 13 at midnight. Without success. The standoff ended with a closing non-essential federal services for six days, from 14 to 19 November 1995, and again for two weeks, from 16 December 1995 to 6 January 1996. Or 28 days in total.
Unlike the current iron arm, an agreement was reached in 1995 to fund the Pentagon, which was spared by the “shutdown”. 700,000 employees deemed “non-essential” were put to forced unemployment, or had their salaries suspended for several weeks. They were paid once a budget agreement found in January 1996.
The airline industry was hit by the crisis, the distribution of passports and visas have been severely disrupted. Experts from the White House today believe that the closure of federal services in 1995-1996 cost the United States more than two billion dollars – current prices or 0.01% of GDP.
Politically it was Bill Clinton who won the showdown, the Republicans appear to be grumpy, obsessed with cost control. Bill Clinton was elected president in late 1996.
• What are the Practical Consequences for Americans?
Barack Obama himself will be affected in their daily lives. Three quarters of 1701 officials assigned to the White House are in effect deprived of work, after the crisis plan of the presidential administration. Barack Obama will have fewer staff to cook for him, vacuuming in the Oval Office, but also to monitor the economy and even the security advisor.
In Washington DC, garbage collection and street cleaning will be suspended. Nearly one million civil servants, mainly in the capital can be found, from Tuesday morning, technical unemployment. And not a matter of working at home: tax officials who are tempted to connect with them through dedication, be identified by the computer system and might place for good!
Most major governments are idle. At the Pentagon, 400,000 civilians – half the workforce – will receive a letter from Tuesday notifying them their lay-offs. As for the military, they will be required to fulfill their duty to pay their balance will be deferred, Barack Obama warned Monday.
Some 90,000 tax officials will stop working. The Ministry of Justice, 18,000 of 115,000 civil servants will have to stop working. The civil trial will be delayed by the thousands.
In the field of health, Bethesda Hospital, in suburban Washington, which depends on the National Institutes of Health, refuse any new patient.
Since there seventeen years, federal museums, national parks, officials of the Ministry of the Environment will be forced out of business.
Barack Obama, while dramatizing the issue, in a televised speech Monday night, reassured the two American astronauts currently in orbit on the International Space Station: NASA closes on Tuesday morning, but not the center of Mission Control.
• What Impact on Markets and the U.S. Economy?
In the United States, where the states are very independent, paralysis federal agencies concentrated in Washington should have no serious impact on growth, provided that the closure does not extend beyond a few days. “The impact on GDP and markets will remain limited” says Nathan Sheets Citi bank . “In contrast, the loss of credibility will be much more important!” He added.
In terms of wealth produced, experts suggest a decline in GDP of 0.3% to 1.4% in the fourth quarter, according to the duration of the crisis and the number of staff to be laid off. The worst case scenario is based on a one-month closure.
Nevertheless, the S & P 500 which is the highest since 2009, should not lose more than 1.5%. the early days. In 1995, the S & P 500 gained 0.1% on the same period of the shutdown. “Historically, this is a good opportunity to do business on the stock market,” says Art Hogan, Lazard in New York, “but this time it is more risky to buy, with the showdown looming the debt “…
• What is the Relationship Between the “Shutdown” and “Debt Ceiling”?
The budget impasse could complicate the settlement of the debt crisis, which would be much more serious for the markets. Since 1917, Congress annually sets a maximum loan that the executive should not exceed to finance its expenditures, the “debt ceiling.” The debt ceiling will reach the year, set at 16.700 billion on 17 October 2013. Mid-September, Obama asked Congress to an extension. Republicans refuse unless Barack Obama renounced his health reform.
If the ceiling is not raised by a congressional authorization, the Treasury will no longer have authority to borrow to pay current expenses and pay its billion of debt coming due. The United States would then find themselves in default, an unprecedented situation which certainly plunge the world into a new financial crisis.
Unlike the “shutdown” budget, such a blockage has ever happened in American history. Congress and White House have always found compromise accompanied by additional debt and emerging economies.
I just wish people were more open minded and educated
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