U.S. government shuts down; Congress remains deadlocked

By John Whitesides and Andy Sullivan

WASHINGTON | Tue Oct 1, 2013 12:17pm EDT

(Reuters) – The U.S. government partially shut down for the first time in 17 years on Tuesday as a standoff between President Barack Obama and congressional Republicans over healthcare reforms closed many government offices, museums and national parks and slowed everything from trade negotiations to medical research.

Federal agencies were directed to cut back services and up to 1 million workers were put on unpaid leave. The stalemate sparked new questions about the ability of a deeply divided Congress to perform its most basic functions.

Republicans in the House of Representatives had tried to tie renewal of government funding to measures undermining President Barack Obama’s signature health care law, while the Democratic-controlled Senate repeatedly rejected those efforts.

In Washington, museums were closed to tourists and police erected barriers around landmarks like the Lincoln Memorial.

“I think it’s outrageous. You know these guys are put into office to help the people, not to hurt them,” said federal worker Ronald Jackson, who commuted 55 miles in to work at the Treasury Department only to find the office empty. “If we’re not getting paid, they shouldn’t get paid.”

If Congress can agree to a new funding bill soon, which Obama insists not be tied to the reforms, the shutdown would last days rather than weeks, with relatively little impact on the world’s largest economy.

But no signs of compromise emerged immediately as the Democratic-controlled Senate formally rejected an offer by House Republicans to break the logjam.

“This shutdown was completely preventable. It should not have happened,” Obama wrote in a letter to government employees.

Whether the shutdown represents another bump in the road for a Congress increasingly plagued by dysfunction or is a sign of a more alarming breakdown in the political process could be determined by the reaction among voters and on Wall Street.

Initial market reaction was muted. U.S. stocks edged higher on Tuesday as the S&P 500 .SPX opened 0.13 percent higher and the Nasdaq Composite .IXIC gained 0.19 percent.

A week-long shutdown would slow U.S. economic growth by about 0.3 percentage points, according to Goldman Sachs.

The political crisis raised fresh concern about whether Congress can meet a crucial mid-October deadline to raise the government’s $16.7 trillion debt ceiling. Some Republicans have vowed to make that also conditional on defunding Obama’s healthcare reforms.

Failure to raise the debt limit would force the country to default on its obligations, dealing a blow to the economy and sending shockwaves around global markets.

After missing the midnight (0400 GMT) deadline to avert the shutdown, Republicans and Democrats in the House continued a bitter blame game, each side shifting responsibility to the other in efforts to redirect a possible public backlash.

The political stakes were particularly high for Republicans, who are trying to regain control of the Senate next year. Polls show they are more likely to be blamed for the shutdown, as they were during the last one in 1995 and 1996.

“Somebody is going to win, and somebody is going to lose,” said Quinnipiac University pollster Peter Brown. “Going in, Obama and the Democrats have a little edge.”


The shutdown, the culmination of three years of divided government and growing political polarization, was spearheaded by Republicans associated with the conservative Tea Party movement united in their opposition to Obama, their distaste for the president’s healthcare law and their campaign pledges to rein in government spending.

Obama refused to negotiate over the demands and warned a shutdown could “throw a wrench into the gears of our economy.”

Some government offices and national parks were shuttered, but spending for essential functions related to national security and public safety continued, including pay for U.S. military troops.

Even so, Defense Secretary Chuck Hagel, visiting U.S. ally South Korea early Tuesday, warned that the shutdown would undermine American credibility abroad and lead allies to question the nation’s commitment to treaty obligations.

“It’s not shocking there is a shutdown, the shock is that it hasn’t happened before this,” said Republican strategist John Feehery, a former Capitol Hill aide. “We have a divided government with such diametrically opposed views, we need a crisis to get any kind of results.”

“When Joe Public starts rebelling and the financial markets start melting down, then we’ll see what these guys do,” said Democratic strategist Chris Kofinis.

A Reuters/Ipsos poll showed about one-quarter of Americans would blame Republicans, 14 percent would blame Obama and 5 percent would blame Democrats in Congress, while 44 percent said everyone would be to blame.


The potential fallout had some Republican Party leaders worried before the 2014 mid-term elections and the 2016 presidential race, particularly given the Republican divisions over the shutdown.

Republican Senator Ted Cruz of Texas, who commandeered the Senate floor for 21 hours last week to stoke the confrontation and urge House colleagues to join him, sparked a feud with some fellow Republicans who accused the potential 2016 presidential candidate of grandstanding.

Some analysts said a brief government shutdown – and a resulting backlash against lawmakers – could cool Republican demands for a showdown over the debt limit.

“A lot of this is political theater. It’s not about real policy. Part of this is taking a stand for their constituents,” said Julian Zelizer, a historian at Princeton University.

(Additional reporting by Elvina Nawaguna and Roberta Rampton; Editing by Karey Van Hall and David Storey)

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