A US government shutdown could crash the recovery

Red alert.

Relax: the Russians are not about to invade! Washington, however, is staring at collapse: in mid-October, the Treasury has announced that it will be down to its last $30bn which, believe it or not, will only pay for half-a-day’s Federal expenditure. Yes, it’s that time of year again, when Washington stares at its Fiscal Cliff, as Congress must vote through the budget and the increased Total Federal Debt Limit.

This used to be an automatic agreement, but now it’s become a partisan issue between the Republican and Democrat parties. The problem is that the man in the White House is a Democrat president and the men of the Tea Party Republicans don’t like this at all. In particular they don’t like Obamacare, the President’s flagship policy, which begins enrolling the uninsured next Tuesday, as the rich will have to pay far higher taxes to pay for this universal healthcare for all, but especially for the poor.

So the Republicans argue that if the president wanted to bring in this hugely costly measure at a time of global economic recession and banking crisis, he should have cut other expenditures to pay for it. The president saw it differently: he was looking at higher taxes. Last year they struck a deal, which finally ended up with the Republican $80bn sequestration, or expenditure cuts, which hit the military procurement budget hard.

This year, however, the hard men of the Republicans are in no mood to compromise. They perceive a lame duck president, who has just lost a one-armed wrestling match with Vlad the Bad Putin over Syria. They perceive a chance to kill off Obama, Obamacare and the Democrats all in one go. They can see Hillary in the wings getting ready to stand, and the thought of Bill "I didn’t inhale!" back in their White House is just too much for them. This, they perceive, is their last chance but one to prevent the loss of four elections in a row – a calamity for the ageing, predominantly white GOP.

Who will blink first this time? If no one blinks, the US Federal government is bust and out of business. Washington will close and go into shut-down mode by lunchtime. It cannot pay its debts and cannot incur any more debts it cannot pay. The vote on all this is on Sunday, and it looks like a total impasse as we head for the weekend, with a 21-hour filibuster taking up all of last Wednesday.

What happens in a shut-down, the last of which was in 1996? Schools are shut, pensions aren’t paid and thousands of suppliers have to wait for their money. More seriously, the chances are that one of the many expenditures to be cut will be interest on Treasury Bills, which could wreak global market havoc, send interest rates sharply up and kill off the recovery, and even trigger the next banking crisis and a global depression. This is nasty, and could get serious, fast.

Stephen Hill writes for Spear's Magazine

This piece first appeared here.

Photograph: Getty Images

This is a story from the team at Spears magazine.

Photo: Getty
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Unite stewards urge members to back Owen Smith

In a letter to Unite members, the officials have called for a vote for the longshot candidate.

29 Unite officials have broken ranks and thrown their weight behind Owen Smith’s longshot bid for the Labour leadership in an open letter to their members.

The officials serve as stewards, conveners and negotiators in Britain’s aerospace and shipbuilding industries, and are believed in part to be driven by Jeremy Corbyn’s longstanding opposition to the nuclear deterrent and defence spending more generally.

In the letter to Unite members, who are believed to have been signed up in large numbers to vote in the Labour leadership race, the stewards highlight Smith’s support for extra funding in the NHS and his vision for an industrial strategy.

Corbyn was endorsed by Unite, Labour's largest affliated union and the largest trades union in the country, following votes by Unite's ruling executive committee and policy conference. 

Although few expect the intervention to have a decisive role in the Labour leadership, regarded as a formality for Corbyn, the opposition of Unite workers in these industries may prove significant in Len McCluskey’s bid to be re-elected as general secretary of Unite.

 

The full letter is below:

Britain needs a Labour Government to defend jobs, industry and skills and to promote strong trade unions. As convenors and shop stewards in the manufacturing, defence, aerospace and energy sectors we believe that Owen Smith is the best candidate to lead the Labour Party in opposition and in government.

Owen has made clear his support for the industries we work in. He has spelt out his vision for an industrial strategy which supports great British businesses: investing in infrastructure, research and development, skills and training. He has set out ways to back British industry with new procurement rules to protect jobs and contracts from being outsourced to the lowest bidder. He has demanded a seat at the table during the Brexit negotiations to defend trade union and workers’ rights. Defending manufacturing jobs threatened by Brexit must be at the forefront of the negotiations. He has called for the final deal to be put to the British people via a second referendum or at a general election.

But Owen has also talked about the issues which affect our families and our communities. Investing £60 billion extra over 5 years in the NHS funded through new taxes on the wealthiest. Building 300,000 new homes a year over 5 years, half of which should be social housing. Investing in Sure Start schemes by scrapping the charitable status of private schools. That’s why we are backing Owen.

The Labour Party is at a crossroads. We cannot ignore reality – we need to be radical but we also need to be credible – capable of winning the support of the British people. We need an effective Opposition and we need a Labour Government to put policies into practice that will defend our members’ and their families’ interests. That’s why we are backing Owen.

Steve Hibbert, Convenor Rolls Royce, Derby
Howard Turner, Senior Steward, Walter Frank & Sons Limited
Danny Coleman, Branch Secretary, GE Aviation, Wales
Karl Daly, Deputy Convenor, Rolls Royce, Derby
Nigel Stott, Convenor, BASSA, British Airways
John Brough, Works Convenor, Rolls Royce, Barnoldswick
John Bennett, Site Convenor, Babcock Marine, Devonport, Plymouth
Kevin Langford, Mechanical Convenor, Babcock, Devonport, Plymouth
John McAllister, Convenor, Vector Aerospace Helicopter Services
Garry Andrews, Works Convenor, Rolls Royce, Sunderland
Steve Froggatt, Deputy Convenor, Rolls Royce, Derby
Jim McGivern, Convenor, Rolls Royce, Derby
Alan Bird, Chairman & Senior Rep, Rolls Royce, Derby
Raymond Duguid, Convenor, Babcock, Rosyth
Steve Duke, Senior Staff Rep, Rolls Royce, Barnoldswick
Paul Welsh, Works Convenor, Brush Electrical Machines, Loughborough
Bob Holmes, Manual Convenor, BAE Systems, Warton, Lancs
Simon Hemmings, Staff Convenor, Rolls Royce, Derby
Mick Forbes, Works Convenor, GKN, Birmingham
Ian Bestwick, Chief Negotiator, Rolls Royce Submarines, Derby
Mark Barron, Senior Staff Rep, Pallion, Sunderland
Ian Hodgkison, Chief Negotiator, PCO, Rolls Royce
Joe O’Gorman, Convenor, BAE Systems, Maritime Services, Portsmouth
Azza Samms, Manual Workers Convenor, BAE Systems Submarines, Barrow
Dave Thompson, Staff Convenor, BAE Systems Submarines, Barrow
Tim Griffiths, Convenor, BAE Systems Submarines, Barrow
Paul Blake, Convenor, Princess Yachts, Plymouth
Steve Jones, Convenor, Rolls Royce, Bristol
Colin Gosling, Senior Rep, Siemens Traffic Solutions, Poole

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.