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Obama cancels Asia trip, warns effects of shutdown could worsen

U.S. President Barack Obama speaks in the Rose Garden of the White House on Oct. 1, 2013.


As the standoff that has shut down much of the U.S. government continued President Barack Obama announced Friday he was scrapping a planned Asian trip that included meetings with Chinese and Russian leaders.

Mr. Obama had planned to leave for Asia on Saturday.

"The president made this decision based on the difficulty in moving forward with foreign travel in the face of a shutdown, and his determination to continue pressing his case that Republicans should immediately allow a vote to reopen the government," the White House said in a statement.

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Meetings with Russian President Vladimir Putin and Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation were cancelled.

Amid increasingly shrill warnings, the standoff between Mr. Obama and the Republican-dominated House of Representatives headed into a fourth day with a second -- and even worse -- crisis looming.

"The longer this goes on, the worse it will be," Mr. Obama told workers Thursday at a local construction company just north of Washington as both sides jockeyed to blame the other and win what may be a critical battle of public judgment.

"Right now, hundreds of thousands of Americans, hard working Americans, suddenly aren't receiving their paycheques," said Mr. Obama. "Right now they're worried about missing the rent or their mortgage or even making ends meet."

And as the White House is at pains to point out, the shutdown isn't just about park rangers and custodial workers, but also medical researchers and intelligence analysts and many others who are still classed among the so-called 'non-essential" 800,000 public servants told to stay home.

For terrorists and foreign spies, this is a "dreamland" opportunity, James Clapper, director of National Intelligence, asserted because 70 per cent of America's spies and intelligence analysts aren't on the job. "Each day that goes by, the jeopardy increases."

With the government shut down and the debt-ceiling deadline looming – now less than two weeks away – the Obama administration is ramping up the pressure on Republican Speaker John Boehner.

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"In the event that a debt-limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth," the Treasury Department warned as it released a strongly worded report about the macroeconomic impact of failing to raise the $16.7-trillion debt limit.

"Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

Raising the debt limit – routinely done more than 40 times times since Ronald Reagan was president – has become a new point of partisan brinksmanship since Republicans first threatened to put the United States into default in a fight over taxes last year.

In the event of a default, "the unthinkable will have become real, and the 'full faith and credit' of the United States will be a mirage rather than an accepted fact," warned Richard Fisher, a senior Federal Reserve Bank official.

Raising the ceiling permits payment of bills already mandated by Congress, rather like increasing a line of credit. No new spending is authorized.

It was amidst those dire warnings that one of the first glimmers of hope emerged. The New York Times reported that Mr. Boehner had privately assured unnamed moderate Republicans – who are growing increasingly restive with the insistence of the right-wing Tea Party faction to defund Obamacare as the price for re-starting government operations – that he won't allow the nation to go over the fiscal cliff.

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"House Speaker John Boehner has always said that the United States will not default on its debt," one of his spokesman told Reuters in response to the New York Times report.

That may indicate Mr. Boehner wouldn't allow the debt-ceiling deadline to be co-mingled with the government-shutdown standoff – which many regarded as the worst-case scenario.

Mr. Obama keeps accusing Mr. Boehner of being held political hostage to the Tea Party. "The only thing preventing people from going back to work …and basic research starting back up and farmers and small business owners getting their loans, the only thing that is preventing all that from happening right now, today, in the next five minutes, is that Speaker John Boehner won't even let the bill get a yes or no vote because he doesn't want to anger the extremists in his party," the President said.

Mr. Boehner won't – so far – allow an open vote on an unencumbered continuing resolution – as the bill needed to fund ongoing government operations is known – because it wouldn't meet the so-called Hastert test. Named for a former speaker, it binds the Republican leader to withholding from a vote any bill that won't win a majority of Republican votes, rather than just a majority of votes in the 435-seat House of Representatives.

Most political observers believe the growing number of Republican moderates unwilling to prolong the government shutdown coupled with the 200 Democrats would easily constitute a sufficient majority to pass such a bill.

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International Affairs and Security Correspondent

Paul More


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