The U.S. Government shut-down started at 12:01 A.M on October 1st, when the Office of Management and Budget ordered the shut-down of government agencies.

2nd October 2013

For the first time in 17 years, the U.S. Government began a partial shutdown putting up to 1 million workers on unpaid leave, closing national parks and stalling medical research projects. Government agencies were directed to “execute plans for an orderly shutdown” late Monday as Congress failed to pass a funding bill that would prevent the disruption of some government services. The U.S. Government shutdown started at 12:01 A.M on October 1st, when the Office of Management and Budget ordered the shutdown of government agencies, however, the National Weather Service and its allied agencies, medical services, armed forces, air traffic management will continue its services despite the shutdown.

What is Government Shutdown?

In U.S., a government shutdown is a situation where the government stops providing essential services; it is similar to a lockout in the private sector. The Office of Management and Budget decides which government functions will stop during the shutdown, the last time a government in U.S. shutdown was in 1995 when there was a standoff between President Clinton and the Republicans who demanded that the President propose a budget using the Congressional Budget Office Numbers rather than relying on the Office of Management and Budget numbers, the impasse ended when the Congress and Clinton agreed to pass a compromise budget.

Why Shutdown?

The shutdown is the result of the impasse between President Obama and the Republican controlled House of Representatives over “Obamacare” (Affordable Care Act) and other spending priorities. The Republican controlled House of Representatives would not pass spending measures for government operations unless Obama made changes in healthcare reforms, but the Whitehouse has refused to budge on the reforms, which provide medical cover for millions of uninsured Americans. A late offer by the House Republicans to break the log jam was rejected by Senate Majority Leader Harry Reid who said “Democrats would not enter into formal negotiations on spending “with a gun to our head” in the form of government shutdowns. Both the parties tried to blame each other, with an eye on the 2014 Congressional elections - President Barack Obama accused the Republicans of being too beholden to Tea Party conservatives in the house of representatives and said the shutdown could threaten economic recovery. The Republicans allege that Obamacare will increase health care costs, shoot up insurance premiums result in tax hikes and is estimated to add $ 600 billion to debt.

Effects of the Shutdown

President Obama said on Monday that “children, seniors and women would be hamstrung if the government were to shutdown”. The shutdown means U.S. government departments will close, forcing as many as 70,000 government employees to take unpaid leave. While the postal services will remain unaffected, all national parks would likely to be closed including the National Zoo in Washington. In the healthcare sector, new patients would not be accepted into clinical research at the National Institutes of Health, but current patients would continue to receive care. The Internal Revenue Services (IRS) said it would suspend all its tax audits but American citizens would continue to pay taxes and file their returns, the toll free help lines of the IRS would be shutdown. The President said the NASA would be shut completely but the workers at Mission Control in Houston would continue to support the International Space Station where two Americans and four others are deployed.

Impact on Economy

A shutdown of more than one week could cost the U.S. economy more than $ 10 billion. Professor Fariborz Moshirian, a director of the Institute for Global Finance at the University of New South Wales says the instability in the political scenario might force investors to take away capital from the U.S., despite people assuming that more capital will be flowing into the U.S. in this situation. “We are going to see major implications – the dollar as a major currency is going to be affected,” he said. Peter Ryan, Business Editor of ABC News said a prolonged shutdown could hurt the U.S. economic recovery and consumer confidence. “This inability of the U.S. Congress to agree on basic housekeeping has now become a very unfunny joke” he said.

Republicans Divided

The potential fallout has left Republican leaders red eyed ahead of the 2014 midterm elections and the 2016 presidential race, Republican Senator, Ted Cruz touted as the next Presidential candidate, commandeered the Senate floor for 21 hours last week and encouraged others to follow suit, sparking a feud with fellow Republicans who disagreed with the shutdown and accused the potential 2016 presidential candidate of grandstanding. “I’m going to vote against it, “Rep. Peter King told the Daily News. “All we are doing is leading ourselves into a government shutdown for no reason.