With the US government shutdown moving into the third
week, the fear of US defaulting for the first time in history has intensified. The
credit limit set at $16.7 trillion will be reached by mid October -17th
the treasury presumes. The Republicans are using this predicament along with
the recent deadlock over the fiduciary budget spending for the new fiscal year
to delay Obama’s signature Healthcare policy – Obamacare.
The
Deadlock:
The reason the US government is in a state of semi-paralysis
is due to the senate’s inability to finalize the current continuing Resolution
or CR. Republicans are using this opportunity to postpone the implementation of
Obamacare and hence has proposed a bill to implement the budget cuts, the next
fiscal year budget and to delay the healthcare plan by a year. The democrat
controlled Senate however has refused to give in to the demands and has sent
the bill back to congress for ‘Reconsideration’. Because of this, the
government was unable to fund itself post 1st October, their new
fiscal year and has asked its 800,000 of 3.3 million strong workforce to stay
at home (A bill was passed last week to give back-dated wages to about half of
them).
Not all government functions were
closed from Oct. 1 — Social Security
checks will still get mailed, and veterans' hospitals will stay open. But many
federal agencies shut their doors and sent their employees home, from the
Environmental Protection Agency to hundreds of national parks.
So in short, because of its
inability to spend the government is unable to continue its less essential
services like tourism, research, overseas embassies, etc.
( More details can be found at : http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/30/absolutely-everything-you-need-to-know-about-how-the-government-shutdown-will-work/)
The
Credit Cliff :
In his letter to the US house speaker John Boehner, treasury secretary Jack
Lew warned the congress that on October 17,US would reach its credit limit of
$16.7 trillion. If the congress fails to increase the limit, the government will have
to survive on the 80 million payments accrued per day which is far from
sufficient to meet the daily requirement – a whopping $60 trillion. Hence the request.
(FYI - Since 1960, Congress has raised the debt
ceiling 78 times.)
Consequences of not increasing its
borrowing limit - running out of money to pay its bills, increase in interest
rates, crash in the value of dollar, gravely wounding the economy, and perhaps
even throwing it back into recession.
However, the speaker Mr Boehner is
using this opportunity to not only pressurize the democrats but also to trash
the democrat’s reputation. He wants the people to realize that “The debt limit
remains a reminder that, under President Obama, Washington has failed to deal
seriously with America's debt and deficit."
Ultimately whether the shutdown is
reverted or the debt limit increased, congress’s reputation has taken a major
hit and has proved that it is impossible for the two parties to work
cohesively.
