New Delhi:
The United States saw its first government shutdown in 17 years as a raging standoff on Capitol Hill came to an impasse and the midnight deadline struck. The US government will now be able to fund only essential services, and starting Tuesday morning, 800,000 federal government workers will be placed on unpaid leave for an indefinite period.
While law enforcement agencies, airports, passport offices, public schools, immigration services and federal courts will remain open, national parks, zoos, free museum visits, Capitol Hill tours and visits to national monuments, including the famous Statue of Liberty, will be shut down.
President Barack Obama expressed his disappointment. "Unfortunately, Congress hasn't fulfilled its responsibility. It's failed to pass a budget and as a result, much of our government must now shut down until Congress funds it again... It would throw a wrench into the gears of our economy."
Experts say the US economy will lose $10 billion every week, and for every one week of shutdown, the US will lose 15 bps from its GDP. Risk assets such as global equities and oil could be hit, along with fragile currencies like the rupee. But for some, this could mean a buying opportunity as the impact of past shutdowns has not been severe.
The key contention was Obamacare. Republicans wanted to use the legislation to de-fund President Obama's signature healthcare reform, which the Democrats staunchly defended. The irony is that even with the shutdown, Obamacare will stay in place as a large portion is financed with mandatory funding.
A shutdown is not a novelty for the US. Since 1976, there have been 17 government shutdowns. The longest was under the Clinton administration in December 1995 and lasted three weeks but most were resolved in under a week.
Will the two sides arrive at a resolution in the next few days? While popular opinion says yes, the relief will be short-lived. And in two weeks, an even deadlier face-off is expected on the debt ceiling, which will keep the world's largest economy on edge.