First U.S. shutdown in 17 years unavoidable with no talks

‘Small Hope’

“I still hold out a small hope that Republicans will come to their senses,” Senator Charles Schumer of New York, the chamber’s third-ranking Democrat, said today on MSNBC’s “Morning Joe” program.

“There aren’t any Republicans talking about shutdown,” Senator John Thune, a South Dakota Republican, told Bloomberg Television’s Peter Cook. “We want to fund the government.”

House Republicans said they’ll respond by again asking for changes to Obamacare and spent yesterday trying to shift blame for a shutdown to the Democrats.

Representative Kevin McCarthy of California, the No. 3 House Republican, didn’t rule out the possibility of passing a spending measure that lasts a few days to give the parties time to negotiate -- if Democrats are prepared to go along with some Republican efforts to trim back Obamacare.

‘Little Longer’

“We will not shut the government down,” McCarthy said on the “Fox News Sunday” program. “If we have to negotiate a little longer, we will continue to negotiate.”

Even that option seemed unlikely, as Democrats have said they aren’t interested in changes to Obamacare, first passed by Congress in 2010.

House Republican leaders don’t expect to have enough party support for a measure that only extends federal spending, according to a leadership aide who spoke on condition of anonymity to discuss strategy.

If that’s what the Senate passes today, a likely option for House Republicans to attach to the spending measure is a provision ending the government’s contribution to health insurance for Congress members and their staffs, the aide said.

Trying to push Senate Democrats into action, about 20 House Republicans gathered yesterday in front of the Senate side of the U.S. Capitol and accused Democrats of wanting a standoff to score political points.

“This is the old football strategy,” Representative Tim Griffin, an Arkansas Republican, said holding a football. “When you get to where you want to be in a football game, you run out the clock.”

In a government shutdown, essential operations and programs with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments.

A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers.

Debt Limit

A brief government closure won’t lead to any significant change of the Treasury Department’s forecast for when the U.S. will breach the debt limit, a Treasury spokeswoman said yesterday in an e-mail. The Treasury has said measures to avoid breaching the debt ceiling will be exhausted on Oct. 17.

Greg Valliere, chief political analyst for Potomac Research Group Holdings in Washington, told Bloomberg Television today that “a shutdown is not the issue” because default is more important.

“If we even talk about default, if we come within a day or two of default, that’s a terribly negative story for the overall economy,” he said.

Adding up a looming government shutdown and the potential for a default is “massive uncertainty for at least another month, and markets don’t like uncertainty,” he said.

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