Phew! US Leaders Finally Reach A Deal To Reopen The Government And Raise The Debt Ceiling - For A Few Months
When the government partially shut down on October 1st, after lawmakers were unable to reach an agreement on what is usually a routine matter - Passing the Continuing Resolution (CR) to fund normal government programs - most political pundits predicted that it would last just a few days. They were obviously wrong.
The bickering between the members of the two parties continued for 16 days, something that made people both in the USA as well as overseas, a little nervous. That was because by midnight October 16th, Congress had to come to an agreement on another matter that was even more important than the CR because it involved many other countries - That of raising the nation's $16.7 trillion debt ceiling to $18 trillion, so that the government could fulfill its domestic and foreign debt obligations.
So on October 16th, when Senate Majority Leader Harry Reid and GOP Leader Mitch McConnell finally announced that they had reached a deal to end this crisis, there was an almost audible sigh of relief throughout the world. As soon as the Senate approved the deal around midday, it was sent over to the House where it was debated on for hours and signed just shortly prior to the midnight deadline of the much feared US default. The agreement did not get to President Obama for signature until early Thursday morning, but that did not matter given that he had already indicated his approval.
Ironically, the agreement made no substantial changes to two main reasons that led to the long drawn shutdown - Defunding of Obamacare and repealing the medical device tax. The only item added is a small provision that requires individuals and families seeking subsidies to purchase the health plan, to verify their incomes.
Though this may appear to be a victory for President Obama and the Democratic Party, it could be a very temporary one. That's because the agreement only allows funding to reopen the government and keep it functioning until January 15th, 2014. Also, it only extends the debt limit through February 7th, 2014, although the Treasury Department does have tools at it disposal to allow it to temporarily extend the borrowing capacity beyond that date, should the leaders decide to act up again.
Whether we see similar drama early next year is anybody's guess. Meanwhile, US financial rating agency Standard and Poors estimates that the spat between the two parties has cost the economy at least $24 billion USD. It also resulted in lowering the nation's Gross Domestic Product (GDP) growth by 0.6% for the quarter and reducing the total estimate for the three months from 3% to 2%. And if that's not bad enough they believe that the weakness could continue until the government reaches a final deal, because people will remain fearful of the same issues rearing their ugly heads in January, and will, therefore, be cautious about making discretionary purchases.
Given that the US economy is weak to begin with, even a relatively modest amount of cutback in spending can set back any recovery considerably. It is, therefore, no wonder that poll taken by American Polling and Media company Rasmussen on Wednesday showed that if allowed to vote right now, 78% of Americans would be in favor of replacing the entire Congress, regardless of party lines.
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Critical Thinking Challenge
While government shutdowns do not occur frequently, they cause a lot of...