Cor blimey what a few weeks this has been the US partial shutdown which continues to show signs of the Republicans not backing down with the tea party egging them on over the Obama Care and public opinion supports Obama. Not only is the Republican Party is becoming a liability they are prepared to put a dent to their national economy over the Obama Care and not paying their local government staff and the President of World Bank continues to warn the US they are only “days away from a very dangerous movement” owing to the government’s borrowing crisis.
Intriguingly World Bank urges US policy makers to reach a deal to raise the government’s debt ceiling before the 17 October 2013 deadline. This warning comes as the US treasurers will end up bankrupt if they don’t start to simulate their economy and consequences are this will lead to another world recession.
It has been alleged that the last ongoing talks to avert US default broke up on Sunday evening without resolution amid signs that investors were growing increasingly nervous that politicians would not reach a deal in time.
Democrat majority leader, Harry Reid, appeared briefly in the Senate to say he had a “productive and substantive” discussion with Republican Mitch McConnell and was optimistic about a deal, but suspended public proceedings until 2pm on Monday while his backroom talks continued.
The only outward sign of movement from the White House came in a Sunday afternoon phone call with House minority leader Nancy Pelosi, in which President Obama reiterated his insistence on Republicans agreeing to end a government shutdown and extend the debt ceiling before he would negotiate any budget concessions.
Political veterans in Washington have warned of an investor backlash if markets reopen this week with Republicans and Democrats still unable to agree to raise the US debt limit. The New York Stock Exchange is open on Monday, despite the Columbus Day public holiday. Crucially, bond traders do not return until Tuesday.
Early currency trading in Asian markets, showed the dollar sliding against the yen and other leading currencies on Monday morning in reaction to the weekend’s continued impasse.
The futures market gave an indication of how US equities traders might react when it also opened down on Sunday night. US markets had rallied sharply toward the end of last week, as both sides finally looked close to a deal that would extend the debt limit and possibly also end a government shutdown that is now into its third week.
But since stock markets closed on Friday afternoon, separate proposals from the House of Representatives and the Senate have been rejected by the White House, leaving only the fragile talks between Senate rivals Harry Reid and Mitch McConnell still ongoing.
Earlier on Sunday a series of lawmakers and former officials, appearing on television talkshows, suggested that even these remaining discussions were mired in disagreement, raising again the serious possibility of a US default when the current debt limit expires on Thursday.
David Plouffe, formerly Obama’s senior political adviser, put the prospects of a deal before Thursday at “no better than 50/50”. “The country needs to prepare that this will go on for a while,” he told ABC, arguing that the best hope of a deal now would be when “the markets say something very loud when they open tomorrow”.
The former defence secretary Leon Panetta also warned of long-term diplomatic and military consequences. “America is being weakened and we are sending a message to the world that the United States can’t govern,” he said on NBC. “I think our readiness is already badly damaged.”
Members of the current Obama administration were noticeably absent from the Sunday morning television schedule, but a succession of senior lawmakers acknowledged that progress had stalled and said negotiations could even be in reverse. The moderate Republican senator Susan Collins confirmed that Democratic majority leader, Reid, had rejected a plan of hers, involving symbolic concessions over President Obama’s healthcare reforms in exchange for longer-term budget agreements, which caused brief optimism on Friday.
“I was very surprised that Senator Reid said that. I don’t think it was very productive,” she told CNN. “There is a lot of justified anger at Congress and the president in failing to solve these problems. The president should have brought the leaders to the White House far earlier than he did.”
Collins insisted that there were still “a lot of productive conversations going on behind the scenes”. “We had 12 people meet yesterday, just last night I had two more Democrats and a Republican contact me to say they wanted to be part of group,” she said.
But attention is now focused on direct talks between Reid and the Republican minority leader, McConnell, who were expected to meet again late on Sunday.
The conservative Republican Rand Paul said he feared talks were going backwards because Senate Democrats had introduced demands over the so-called sequester, budget cuts agreed to end the last debt stand-off in 2011.
“To me there is a big picture problem,” he told CNN. “What I cannot accept is that the Democrats want to end the sequester cap. It’s a non-starter.”
Instead, he argued that the consequences of breaching the debt limit on Thursday would not be as dire at the White House has insisted, because it could chose to prioritise interest payments over other obligations and therefore avoid a formal default.
“It is irresponsible for the president to scare people; a good leader should be saying we will never default,” Paul said. “We have tax revenues of $220bn a month and $20bn a month in interest payments to pay. Not raising the debt ceiling means you have to balance the budget – it does not mean you have to default. They are not the same thing.”
But Christine Lagarde, the managing director of the International Monetary Fund, repeated warnings that emerged from a week-long meeting of global finance ministers in Washington, insisting there was no such thing as a partial default that prioritised interest payments but reneged on other obligations.
“You have to give certainty to the rest of the world,” Lagarde said, on NBC. “Creative accounting is not the solution, and markets know that. You have to give certainty to the rest of the world. You have to honor your signature.”
Such talk of partial default has also alarmed many in Washington, and led to a note of increasing exasperation even among more moderate Republicans.
“We are in freefall as Republicans and Democrats are not far behind,” Senator Lindsey Graham said on ABC, warning that he could not see any compromise right now. “I can see why 60% of people wanted us all voted out. We are ruining both institutions.”
The Democratic whip Dick Durbin said the talks between Reid and McConnell were still the best hope, and should be seen in themselves as a sign of progress.
“It is a breakthrough,” he told NBC. “I know it doesn’t sound much, but the conversation that started yesterday has the promise of finding a solution. I don’t want to be overly optimistic but there is a lot at stake.”
Intriguingly Hillary Clinton has raised concerns about the “distressing” shutdown of the United States federal government amidst several international crises and defended the “critical” work done by American intelligence agencies.
Speaking in London on Friday evening, the former US secretary of state said while she did not want to criticise her own country while abroad the impasse at home did have global impact.
“It’s distressing at any point to see a political system that has weathered so many crises over centuries now being caught up in what are very unfortunate partisan disputes,” she said.
“Underlying them are questions about America’s direction at home and abroad. And I am confident we will work our way thought this latest challenge as we did during my husband’s administration”.
Clinton, the front-runner for the Democratic nomination for president in 2016, was speaking as she made wide ranging remarks after accepting an award from the foreign policy think-tank Chatham House.
Her comments come amid concerns among Western allies that the shutdown of the US government is affecting its ability to engage in crucial international hot spots including the civil-war in Syria and the fragile negotiations with Iran.
Asked about the revelations about the access US and UK intelligence agencies had to Internet communications, Clinton said the capabilities revealed by Edward Snowden were “critical” to public safety.
“On the intelligence issue, we are democracies thank goodness, both the US and the UK,” she said. “We need to have a sensible adult conversation about what is necessary to be done, and how to do it, in a way that is as transparent as it can be, with as much oversight and citizens’ understanding as can be.”
But she added: “There are some things from my own experience as a senator as a secretary of state that really are critical ingredients in our homeland security and helping to protect people in other countries as well.
“Much more personal information about many more Americans is held by businesses in the US than by our government. It would be going down a wrong path if we were to reject the importance of the debate, and the kinds of intelligence activities that genuinely keep us safer.”
The question for me is will the Republicans heed warning from the World Bank or will they continue do more if the same to try bring down President Obama to his knees and hope he will disappear into the wilderness. My personal view is I don’t think so but can be proven wrong.