The American Financial Shutdown

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“American President Barack Obama accused the House-Republicans for their non-stop “ideological crusade” to wipe out his signature healthcare law (Obamacare), which caused the first partial closure in 17 years (after December 1995- January 96).” 

“On October 17th the American government will also breach the debt ceiling, and it has never happened before.”

The American democracy works in mysterious ways. For a non-American the words used (in the above quotes) are bit hard to grasp. Our newspapers carried news that, “800,000 federal employees of USA were forced to stay home, without pay.” But, what’s going with the democratic-led Senate and House- Republicans? Why Republicans are opposing ’Obamacare’? What’s meant by debt ceiling?

We all know that United States federal government has two houses: the House and Senate. The various demands of a Federal government need to be funded each year to operate. If the United State Congress (like a Parliament) can’t agree on what or how to fund, they close down. President Obama’s democratic led Senate has faced a dispute by republicans regarding Obama’s healthcare law.

Mitt Romney

US financial year ended on September 30, 2013 and the politicians have failed to agree on the US budget of 2013-14. Why? The Republicans tried to use the budget as leverage and tried to cause some delay or cuts to Obamacare. However, the Democrats has stood firm. In recent years, there were bad occurrences at bill passing and so there is a measure called ‘Stopgap budgets.’ But, the Senate (Democrats) and House (Republicans) are at odds on stopgap should look like. So, since there was no agreement on ‘Obamacare’ or ‘Stopgap budgets’, the government has shut down.

A shutdown like this occurs only when the Congress has no appropriate bills to fund the ‘discretionary’ spending. The spending program that doesn’t come under ‘discretionary’ comes under ‘mandatory’ spending. The mandatory type is like an autopilot mode. The thing that comes under this spending continues unless Congress intervenes and changes the law. The irony, here is, ‘Obamacare’ relies on mandatory spending (that isn’t affected by a shutdown). Farm subsidies, Social Security and handful of other measures also come under the ‘mandatory’ spending.

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Now, how the government shutdown is related to something called ‘debt ceiling.’ American democratic system is very unique. They have an issue called ‘debt limit.’ The limit is a kind of restriction made by the legislation, on how much amount of debt can be issued by the ‘Treasury.’ The debt ceiling instructs ‘Treasury’ not to borrow more than a certain amount of money. In 2011, the Congress raised the debt limit ($16.394 trillion) and this limit is reached by 31 December, 2012.  On May 2013, the debt ceiling is further raised to approximately $16.7 trillion. The shutdown and debt ceiling are different problems, but America’s legal limit on borrowing will hit the limit point $16.7 trillion) on 17th October. So, if a deal regarding the ‘Shutdown’ isn’t reached, then America would run out of borrowing room.

Why can’t they again raise the debt limit? Yeah, they can, but legislation is needed. The Republicans are conniving or intelligently trying to tie the ‘debt limit’ to Obamacare — contesting that the healthcare reforms are unaffordable, right now.

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The government shutdown doesn’t result to “V for Vendetta” like anarchism. The functions of the government won’t evaporate. Hospitals will stay open; air travel will keep on running. And, of course they can’t deploy soldiers and let out federal prisoners. The shutdowns mostly separate federal government workers into ‘essential’ and ‘non-essential.’ As, the name suggests, the ‘non-essential’ will go home and the ‘essentials’ would see their pay cheques delayed. Nearly 1.5 active-service military personnel will get paid no matter how long the shutdown lasts.

Although, 800, 00 employees are temporarily sent to home, the shutdown is only seen as an embarrassment, not as a catastrophe. The shutdown causes problems, but there are dominating laws that are specifically designed to avoid catastrophe. However, the beclouding element called ‘debt ceiling’ raises some concern.

“I will not negotiate over whether or not America keeps its word and meets its obligations. I will not negotiate over the full faith and credit of the United States. This country has worked too hard for too long to dig out of a crisis just to see their elected representatives here in Washington purposely cause another crisis,” Obama said.

Obama’s and the Republican’s stance will be analyzed or crucified in the coming days. We have to wait and see, whether the crisis is a passing cloud or a looming shadow.

 

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