Costly shutdown

A budget stand-off between Democrats and Republicans over president Obama’s healthcare law has resulted in the first government shutdown in years in the US.

The last one was during the Clinton presidency in 1997, and was again the result of a political fight between the Republicans and the president. It lasted 21 days and cost the economy $ 2 billion. That was boom time for the economy. The impact of a sustained shutdown would be much more severe now, when the economy is only recovering from a slowdown. If the administration’s request to Congress to raise the debt ceiling also fails later this month, it could have more serious repercussions. That might mean reneging by the US on its debt commitments and loss of sanctity of US treasury bonds. The whole series of events can push the US into another recession and can impact the economies of other countries, too.

The present crisis may not be taken that far. As  a result of the shutdown many government services have been curtailed and as many as eight lakh federal staff  are being idled. Some others might not even get their pay. The dispute which has led to the crisis was over the demand of the Republicans to scrap or delay the  implementation of Obama’s public health scheme which had once been passed by Congress and upheld by the Supreme Court. But the rightist fringe of the Republican Party is still ideologically opposed to it. It is trying to put pressure on Obama to compromise on the implementation of the scheme. The House of Representatives is dominated by the Republicans while the Democrats control the Senate. The Republicans refused to pass the spending bills for the new fiscal year, which started from October 1 in the US, and so a good lot of financial activities have ground to a halt.

The new healthcare system came into effect on the same day and large numbers of people registered themselves to join the scheme. Neither president Obama nor the Democrats are likely to compromise on the scheme, but as the crisis prolongs, negotiations are bound to lead to a meeting point sooner or later. But the crisis would also show that political brinkmanship can lead to situations where national interests are lost sight of. Politics is made of the same stuff everywhere.