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A government shutdown is not the real threat

The debt ceiling debate is far more important.

Photograph: Getty Images

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.