© Michael Reynolds/Pool/EPABarack Obama delivers a statement on the budget, a possible US government shutdown and foreign policy.
President Barack Obama on Friday issued a stark warning over the consequences of the continued stalemate in Congress over funding the federal government, saying US troops face disruption to their pay in the event of a shutdown and castigating his opponents for threatening to "blow up the entire economy".
The president took to the podium for the second time in as many days, to issue his most withering attack yet on House Republicans who will spend this weekend deciding whether to attach new demands to stalled federal spending authorisation.
Obama said he was willing to negotiate over government spending, but would not give in to a laundry list of other demands from Republicans who want to repeal his signature healthcare law and advance other "pet projects" they have otherwise failed to pass. "We're not going to do this under the threat of blowing up the entire economy," Obama said.
The president warned of drastic economic consequences if the shutdown was forced through. "It would throw a wrench into the gears of our economy at a time when those gears have gained some traction," the president said, claiming that even the threat of a shutdown was already "probably having a dampening effect on our economy".
In fact, economists believe that a shutdown will have less impact on the economy than the looming fight over the debt ceiling. The row over raising the government's $16.7tn borrowing limit is much more serious than tussles over the federal government's spending authority.
The treasury secretary, Jack Lew, warned Congress this week that unless it approves an increase in the borrowing limit imminently, the US government will be unable to meet its bills by 17 October.
"Even if Congress can reach an agreement to renew the federal government's spending authority before it expires this Monday - which is looking increasingly unlikely - there's a much more serious battle brewing over the push to raise the debt ceiling before the Treasury runs out of money sometime shortly after 17 October," Capital Economics pair Paul Ashworth and Paul Dales wrote to clients on Friday.
The Bureau of Labor Statistics will release its latest jobs report next Friday and important manufacturing data will also be released next week. In both cases, economists expect the figures to underline the strengthening US economy. But PNC bank senior macroeconomist Gus Faucher said a failure to raise the debt ceiling would "all but wipe out" that recovery.
"There will be an immediate drag on the economy, interest rates will rise for everyone. Social security, federal wages and contracts will not get paid. It would be disastrous," he said. "The economy would basically stall."
On Friday, Obama showed no sign of backing down in his standoff with House Republicans, insisting that the Affordable Care Act - the healthcare reform, known as Obamacare, that has prompted this latest budget showdown - would continue regardless of what happens on Capitol Hill.
"On Tuesday, about 40 million more Americans will be able to finally buy quality, affordable healthcare, just like anybody else," he said. "Those marketplaces will be open for business on Tuesday no matter what - even if there's a government shutdown. That's a done deal."
Earlier, the Senate set up a clash with House Republicans when it passed a spending authorisation bill that stripped out a clause allowing for the defunding of Obamacare. Obama welcomed the bipartisan deal in the Senate, and appealed directly to lawmakers by spelling out the personal consequences of once again trying to force him to back down over the reform.
© Jonathan Ernst/ReutersTed Cruz was one of 19 Republican senators to vote against a spending bill that stripped out a clause allowing for the defunding of Obamacare.
More than a third of federal workers would be told to stay home if the government shuts down, forcing the closure of national parks from California to Maine and all the Smithsonian museums. Low-to-moderate income borrowers and first-time homebuyers seeking government-backed mortgages could face delays. Supervisors at government agencies began meetings on Thursday, to decide which employees would continue to report to work and which would be considered nonessential and told to stay home under contingency plans ordered by the Office of Management and Budget, or OMB.
"Fifty percent of our members may be locked out of work altogether during this shutdown," said David Cox, president of the American Federation of Government Employees. "Half will be expected to continue to work without a paycheck."
Employees who are deemed essential and keep working will not be paid during any shutdown. Once Congress has approved new funding, they will receive retroactive pay.
Not all government would cease to operate. Services considered critical to national security, safety and health would go on as usual - such as border patrol, law enforcement and emergency and disaster assistance. Social Security and Medicare benefits would keep coming, but there would likely be delays in processing new disability applications. Active-duty military personnel are exempt from furloughs, as are employees of the US Postal Service, which doesn't depend on annual appropriations from Congress. But Obama said troops could face delays to their paychecks.
"If the government shuts down on Tuesday, military personnel - including those risking their lives overseas for us right now - will not get paid on time," the president said.
For the administration, the best-case scenario this weekend is that House Republicans choose to drop their fight over spending authorisation but mount a separate showdown over extending the government debt limit in mid-October.
Obama warned this path, which could lead to the government defaulting on its debt, would be even worse. "Failure to meet this responsibility would be far more dangerous than a government shutdown," he said. "It would effectively be an economic shutdown, with impacts not just here but around the world."
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