A government shutdown is not the real threat

The debt ceiling debate is far more important.

As I write, 2.30pm UK time on 30th Sept, it is looking increasingly likely that the dysfunctional US Congress is stumbling towards an impasse which will cause an embarrassing temporary shutdown of US Government. The one consolation that ordinary Americans can potentially cling to in the face of this debacle, is that this is how it’s meant to be-having escaped Britain’s despotic rule, the Founding Fathers drafted the constitution very carefully to ensure extensive check and balances, limitations of powers, and separation of powers between different branches of government.

Last week the Republican House majority amended the so-called  "continuing resolution" (CR-the bill required to authorize government spending), to include de-funding of the Affordable Care Act (Obamacare). The Democrat-controlled Senate was quick to chuck this out, (of course). The House then came back with a tweeked amendment, delaying some Obamacare for a year and repealing a tax on medical devices.  The senate will also reject this version of CR when it rolls into work today at 2pm Washington time.

We may then get yet another iteration from the House, but time will be running out if so, as the current fiscal year ends and government spending authority expires at midnight on 30th, leaving very little time for the Senate and House to complete this ping-pong game successfully. Waving some of the Senate’s ponderous procedures may yet allow passage before midnight, but it’s looking unlikely now.

Up to 800,000 government workers may be laid-off and some economic statistics will not be released, but the law states that many categories of spending are deemed critical and are thus exempt from mandatory shutdown; only so-called "discretionary spending" is affected. The direct hit to GDP is probably about 0.2 per cent per week of shutdown, on an annualized basis, and I would expect the shutdown to last a week at most.

The real problem here is that there are in fact three parties in the House-mainstream Republicans and Democrats, and then the Republican Tea Party caucus; the latter is effectively forcing Republican House Speaker Boehner to take a stab at Obamacare by including these amendments in the CR-even though they have no chance of getting through the Senate.

The reality is that this is surely a nerve-racking escapade, even for the Tea Party, and certainly for more moderate Republican politicians who know their constituents will not thank them for provoking this pointless to and fro, and a government shutdown. Mid-term elections approach in November 2014 and I believe this is why we should not worry that these CR shenanigans imply anything for the far more important debt ceiling debate, which must be concluded over the next few weeks to avoid a US default.

Congress may yet cause a government shutdown, but if so, that’s probably because politicians know it won’t have disastrous consequences, either for the country or for their chances of re-election - they are extremely unlikely to view the prospect of a US default in the same way. The party seen to have caused that will have committed electoral suicide.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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What does François Bayrou's endorsement of Emmanuel Macron mean for the French presidential race?

The support of the perennial candidate for President will boost Macron's morale but won't transform his electoral standing. 

François Bayrou, the leader of the centrist Democratic Movement and a candidate for the French presidency in 2007 and 2012, has endorsed Emmanuel Macron’s bid for the presidency.

What does it mean for the presidential race?  Under the rules of the French electoral system, if no candidate secures more than half the vote in the first round, the top two go through to a run-off.

Since 2013, Marine Le Pen has consistently led in the first round before going down to defeat in the second, regardless of the identity of her opponents, according to the polls.

However, national crises – such as terror attacks or the recent riots following the brutal arrest of a 22-year-old black man, who was sodomised with a police baton – do result in a boost for Le Pen’s standing, as does the ongoing “Penelopegate” scandal about the finances of the centre-right candidate, François Fillon.

Macron performs the most strongly of any candidate in the second round but struggles to make it into the top two in the first. Having eked out a clear lead in second place ahead of Fillon in the wake of Penelopegate, Macron’s lead has fallen back in recent polls after he said that France’s rule in Algeria was a “crime against humanity”.

Although polls show that the lion’s share of Bayrou’s supporters flow to Macron without his presence in the race, with the rest going to Fillon and Le Pen, Macron’s standing has remained unchanged regardless of whether or not Bayrou is in the race or not. So as far as the electoral battlefield is concerned, Bayrou’s decision is not a gamechanger.

But the institutional support of the Democratic Movement will add to the ability of Macron’s new party, En Marche, to get its voters to the polls on election day, though the Democratic Movement has never won a vast number of deputies or regional elections. It will further add to the good news for Macron following a successful visit to London this week, and, his supporters will hope, will transform the mood music around his campaign.

But hopes that a similar pact between Benoît Hamon, the Socialist Party candidate, and Jean-Luc Jean-Luc Mélenchon, the Left Front’s candidate, look increasingly slim, after Mélenchon said that joining up with the Socialists would be like “hanging himself to a hearse”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.