On Tuesday 1st October, the USA went into partial shut-down mode. Only federal services considered ‘mandatory’ are now running. These essential services include the air traffic control, social security, some medicare benefits and the postal service. However, 800,000 public employees have been sent home without pay, with no guarantee of returning to their jobs. All the National Parks and the National Zoo are shut. The Environmental Protection Agency’s funding has instantly dried up. Students will have their student loans and grants delayed. Disaster care programs have their funds drastically cut, along with the Women, Infants and Children program that supplies poor families with food and milk tokens. Food inspectors aren’t in operation. NASA have sent most of their employees home. Small businesses cannot receive loans. The dollar has dropped in value.
What’s going on?
Apparently, this has happened because the two warring factions of American politics – the Democrats and the Republicans, simply can’t agree on the budget for the coming financial year. The centrepiece of the argument seems to be ‘Obamacare’ – i.e. Obama’s idea that everyone should be entitled to free healthcare, much like in Britain. For some reason the Republicans are very fiercely against this. So against it, that they simply won’t accept a budget that includes it. But Obama isn’t budging, because he pretty much won the last election by promising to deliver this one service.
Congress have been in negotiation, but they failed to agree on a new budget by the 12am deadline last Monday so now the government has basically ground to a halt.
What’s even more worrying, however, is the problematic fact that the USA is about to reach it’s debt ceiling (that’s how much the government can borrow for public spending) of a staggering $16.4 trillion. Actually, it was reached last year, and the US Treasury have been holding the debt ceiling raise on suspension ever since. The rules surrounding this issue are confusing as hell, but suffice to say that this kind of suspension can only go on for so long. It seems raising this mysterious ceiling is long overdue, and it’s estimated to be reached (again?) on 17th October 2013. After this date, the US government will not be able to borrow any money, and will have just $30,000 billion in ‘cash’ to run the country, This might sound like a lot, but it’s really not at all when you consider that the public spending and debt payments accrue to several billion per day.
You would have thought the Democrats and Republicans would throw their differences to the wayside (temporarily) in a heroic bid to save their country from the threat of bankruptcy and chaos.
I thought Americans were meant to be patriotic?
Well, apparently not enough. Economists are saying the US is on track to shoot through it’s debt ceiling, which means it could possibly default on all or some of its debts. As far as I can tell, this would disrupt international financial markets, causing economic chaos . The US government might try to revoke the debts of the many nations that have borrowed from them since WWII. This includes the UK, Germany, many other European countries, Japan and countless developing nations. This knock-on effect could cause an international recession at least as serious as the 2008 sub-prime meltdown.
To be honest with you, I have no idea why Congress can’t just get on and raise the debt ceiling. They’re the ones that have the power to set it; it’s just that they’re so divided they can’t even agree on that one fundamental thing.
Seriously, Congress, stop quarreling and sort it out!