US Senate rejects House budget, shutdown imminent

Senate Majority Leader Harry Reid of Nevada walks to a Senate Democratic caucus to discuss the ongoing budget fight, Monday, Sept. 30, 2013, on Capitol Hill in Washington. Republicans and Democrats blamed each other Monday as they took the federal government to the brink of a shutdown in an intractable budget dispute over President Barack Obama’s signature healthcare law. AP PHOTO/ EVAN VUCCI

WASHINGTON—The United States was just hours from a potentially devastating shutdown of key federal government agencies Monday as lawmakers failed to agree stopgap budget measures.

With eight hours left before a midnight (0400 GMT) deadline, a vote by the Democrat-led Senate to reject the Republican lower house’s latest bill put paid to hopes of compromise.

Both sides blamed the other for the impasse, which will trigger a freeze in spending that President Barack Obama has warned could have catastrophic effects on the shaky economic recovery, and cost thousands of jobs.

As hundreds of thousands of government employees faced the prospect of being sent home for the first time in 17 years, both sides threatened to tough it out.

“We are not going to negotiate on this,” a stern-faced Senate Majority Leader Harry Reid told reporters after the Senate rejected efforts by the House to link a spending bill to a delay of Obama’s healthcare law.

“We are not changing ‘Obamacare,'” Reid fumed, adding that the House should pass a spending bill with no politically motivated riders.

Not giving up hope

Despite the long odds, Obama said he was not giving up hope for a deal to avoid a shutdown.

“I am not at all resigned,” Obama told reporters, but he insisted he would not negotiate under the threat of a federal work stoppage or of defaulting on US debt.

“There’s not a world leader, if you took a poll, who would say that it would be responsible or consistent with America’s leadership in the world for us not to pay our bills,” the president said.

Obama said he expected to speak later Monday to leaders of Congress, where the mood has been fractious and combative for days.

After the Senate passed a straightforward spending bill on Friday, the House countered by attaching amendments seeking a one-year delay to Obamacare and the repeal of a medical device tax that helps fund the law.

If the House moves Monday to offer a bill that includes different anti-Obamacare provisions, as is being considered, “it will be a Republican government shutdown… pure and simple,” Reid said.

Speaker John Boehner took to the floor to defend Republican legislation that would defund Obama’s signature domestic legislative achievement, saying “this law is not ready for prime time.”

Global impact

If the deadline expires without a deal the failure will have a global impact. Oil prices slid and European and Asian shares fell, amid fears for the world’s largest economy.

At a local level, as the Washington day began, staffs at federal agencies were warned that their children would not be able to attend government daycare centers on Tuesday. On Wall Street, the S&P 500 fell 0.6 percent.

Most observers agreed the negotiations were dead from the moment Republicans linked the budget to their bid to thwart Obamacare.

“Speaker Boehner knows he won’t succeed, but the hard right is demanding a pound of flesh to show how serious they are,” Democratic Senator Chuck Schumer said.

Boehner has been under intense pressure from a small band of conservative diehards backed by the anti-government Tea Party movement.

Schumer likened Boehner to a priest in a Mayan ceremony, making “a sacrificial offering to the right-wing gods.”

With polls showing most voters would blame a shutdown on the Republicans rather than Obama, Reid insisted: “The American people will not be extorted by Tea Party anarchists.”

But Boehner branded the Democratic brinksmanship “an act of breathtaking arrogance by the Senate Democratic leadership.”

US and foreign investors fear a shutdown will create a poisonous environment ahead of mid-October talks to increase the country’s legal borrowing authority.

“Things are far from the ‘panic stage,’ but they don’t have to be for investors to be spooked by the apparent intractability of the US political deadlock,” said Tachibana Securities market analyst Kenichi Hirano.

If the debt ceiling is not raised, Washington could default on its loan payments, and Republicans have already warned they will make this their next battlefield.—Michael Mathes