The United States government is on the verge of a politically induced shutdown for the first time in almost two decades, creating another headwind for the country’s painfully slow economic recovery.
Democratic and Republican politicians did nothing over the weekend to bridge their differences over extending the federal government’s spending authority after the current fiscal year ends at midnight on Monday.
The brinkmanship now will extend into the night, as politicians have left themselves barely enough time to find a compromise before the work day begins in Washington on Tuesday.
Failure to do so will put hundreds of thousands of workers on furlough and all but the most essential services will either be delayed or stop altogether. The sight of American lawmakers willfully striking such a blow to their economy also will cause angst in financial markets, which grew increasingly more volatile last week as the odds of a shutdown rose with each day.
“Apprehension is probably the word,” said Kit Juckes, the chief of foreign exchange at French bank Société Générale.
The U.S. system of checks on power often sparks legislative drama. For example, lawmakers took negotiations over raising the legislated debt ceiling to the wire in August, 2011, prompting credit-rating agency Standard & Poor’s to strip the U.S. of its AAA credit rating.
Legislators have failed to fund government operations 17 times since 1977, causing shutdowns that lasted between three and 21 days, according to research by Kevin Logan, the chief U.S. economist at HSBC, a global bank based in London. The last failure was in 1996, when former president Bill Clinton battled Newt Gingrich, the Republican House speaker.
Voters blamed Mr. Gingrich and his party for the shutdown, and that history isn’t lost on John Boehner, the current Republican House Speaker.
Mr. Boehner and his leadership team had tried to avoid this showdown, urging their members to make a stand over the debt limit, which will be breached in the middle of October.
But the Republican Party’s restive Tea Party wing insisted on attacking Mr. Obama’s 2010 health-care overhaul, which will come into effect on Tuesday, regardless of whether the government stays open.
To keep his caucus united, Mr. Boehner last week used the Republican majority to pass a temporary spending bill that would have “defunded” the Affordable Care Act. The Senate promptly rejected that bid, sending back legislation on Friday that would keep the government working through November, but without any conditions.
That set the stage for a rare sitting of the House of Representatives on Saturday. After meeting with his caucus, Mr. Boehner amended the Senate bill to include a one-year delay of Obamacare and language that would scrap a tax on medical devices.
Mr. Boehner called a vote despite warnings from Mr. Reid that the Democratic majority in the Senate would only accept a “clean bill” and a threat from the White House that President Barack Obama will veto any legislation that impedes his signature domestic policy achievement.
“We shouldn’t be wrapping these questions [over health care] up with a government shutdown,” Tim Kaine, a Democratic senator from Virginia, said on Fox News Sunday.
Republicans insisted that they are the responsible ones. Ted Cruz, the Texas Senator and a leader of the uprising over Obamacare, said his party has compromised, since Republicans would prefer to repeal the law. “If we have a shutdown, it will be because Harry Reid sticks with that absolutist position,” Mr. Cruz said Sunday on the NBC program Meet the Press.
The Senate took the weekend off and wasn’t scheduled to resume until Monday afternoon. At that point, Mr. Reid will again remove the health-care provisions from the spending bill and send it back to the House. The speed at which he can do that will depend a great deal on whether Republicans such as Mr. Cruz seek to slow the legislative process.
Defying the high degree of pessimism that has taken hold in Washington, Kevin McCarthy, the Republican Whip in the House, said Sunday that a shutdown will be avoided – even while saying that his party would respond to the Senate’s rejection of the revised bill with yet more amendments.
“We will not shut the government down,” Mr. McCarthy said on Fox News Sunday.