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Senate rejects Boehner’s ‘wacky’ proposal to fund specific services

U.S. House Speaker John Boehner (R-OH) departs the House floor after a series of votes on partial budget measures to send to the Democratic-controlled Senate at the U.S. Capitol in Washington October 1, 2013. The White House rejected a Republican plan to reopen portions of the U.S. government on Tuesday as the first shutdown in 17 years closed landmarks and threw hundreds of thousands of federal employees out of work.

JONATHAN ERNST/REUTERS

The U.S. government shutdown will be measured in days, and possibly weeks, as Washington's warring lawmakers show no willingness to give ground in a showdown that has grown bigger than mere budget politics.

As hundreds of thousands of furloughed federal workers set up automatic replies on their e-mail accounts, the Republican leaders of the House majority drew up a new strategy to test the resolve of their Democratic counterparts in the Senate.

Speaker John Boehner unveiled a strategy Tuesday to hold votes on bills that would fund specific – and popular – government services, such as veterans services and the National Park Service.

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The tactic was a countermanoeuvre to the Senate's refusal to pass a spending bill that the GOP majority in the House tied to changes in President Barack Obama's health-care law – the real target of Republican attacks.

Senate Majority Leader Harry Reid called the House plan "wacky" and said he would not restore the government's spending authority in a piecemeal fashion. Mr. Obama was equally defiant. The White House put out word that the President would veto the latest Republican gambit.

"As long as I am President, I will not give in to reckless demands by some in the Republican Party to deny affordable health insurance to millions of hard-working Americans," he said in the Rose Garden on Tuesday.

The absence of any concerted effort to end the first government shutdown in almost two decades suggests politicians are resolved to fight until public opinion declares a clear winner. That could be a relatively long time coming.

Pressured by a few dozen hard-liners from its Tea Party faction, the Republican Party's leadership has decided to use fiscal deadlines as leverage to force amendments of "Obamacare," an opportunity denied them when the legislation passed in 2010 because they were a minority in both houses of Congress.

Tea Party Republicans tend to come from safely conservative districts and face little risk their stridency will offend the people who elected them. At the same time, Mr. Obama and Democratic lawmakers are standing their ground with renewed confidence, reflecting national polls that suggest the broader public is angry about the shutdown and blames the House Republicans for it.

"The immediate impact of the shutdown is not going to be big enough to concede any time soon," said Stan Veuger, a resident scholar at the Washington-based American Enterprise Institute. "They will wait for the stock markets or the poll numbers to change."

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There was no push from the markets Tuesday, as stock exchanges in New York actually rose. That's not to say investors are totally blasé at the sight of the U.S. government putting some 800,000 non-essential workers on unpaid furlough.

The inability of the American political system to keep the lights on in Washington is creating some nervousness about what will happen when the U.S. reaches its borrowing limit in the middle of October. Without renewed borrowing authority, the federal government would default for the first time ever.

Fitch Ratings, one of the Big Three firms that grades the ability of countries to repay their debts, said Monday that anything other than a "timely" raising of the debt ceiling would force it to review the U.S.'s current AAA rating.

"If you can't govern yourself, how strong can you be?" said Jonathan Lewis, chief investment officer at Samson Capital Advisors LLC in New York. Samson Capitol runs a $56-million (U.S.) currency fund that assumes the U.S. dollar will weaken over the years ahead, in part because of Washington dysfunction. The shutdown is "disheartening for anyone who cares about good governance," Mr. Lewis said.

But that's a longer-term bet. In the short term, the prevailing view is that Washington will sort out its differences before the shutdown seriously hurts the economy.

Mr. Veuger, the academic, who has ties to Republican lawmakers, said he expects the shutdown and debt ceiling will be sorted out in broader budget agreement.

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That view is shared by others. It suggests the political bickering will drag on for a couple of weeks, but ultimately Mr. Boehner would force a resolution rather than risk a debt default.

The hard-line Republicans "reasonably think they are running the place right now," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington and former chief economist in Vice-President Joe Biden's office. "That doesn't mean Boehner is going to let them do so," Mr. Bernstein said. "I don't think he will allow that to happen."

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More

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