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US government shutdown: worse may yet be to come

US president Barack Obama has been quick to blame the Republican Party for the state of government shutdown. EPA/Jim Lo Scalzo

At midnight, the United States government was shut down after Congress could not agree to a deal on changes to president Barack Obama’s signature health-care legislation, Obamacare.

Around 800,000 non-essential government workers have been placed on unpaid leave as a result of the shutdown, which is estimated to be costing the US economy US$300 million per day.

Responding to the shutdown - the first since 1995-96 - Obama accused hardline Republican Party members of having “reckless demands” over delaying Obamacare’s implementation.

They’ve shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans.

The Conversation spoke with US politics expert David Smith of the University of Sydney’s United States Studies Centre for his views on the shutdown.

What does the shutdown mean for America’s global credibility?

I think that the importance is not just the shutdown of government that’s happening now, it’s what it says about the likelihood that the United States might default on its debt sometime before the end of October. For a shutdown like this - as long as it only goes for a few days - the damage will be fairly limited, and this is the sort of thing that we’re actually used to seeing in American politics now: this is the fourth one of these stand-offs that we’ve seen in three years.

But if the United States actually defaults on its debt, the consequences could be catastrophic. This would mean - I would say at a minimum - that interest rates will spike right throughout the American system; this will completely cripple whatever economic recovery is actually happening at the moment; and this will have serious repercussions for the global economy.

The last time the United States came close to defaulting on its debt, the global financial markets actually didn’t react that badly - there was still a belief that the United States would always make good on its debts despite the fact that credit ratings agencies were saying that the US is now so politically dysfunctional that it no longer has the top credit rating, and so interest rates actually remained the same on American borrowing.

But if the US actually defaults on its debt, that might send a signal to markets that the United States is no longer a credible borrower, and given how much debt there is sloshing around in the American system, that could be catastrophic.

Based on historical precedent of past shutdowns, how long is this one expected to last?

It’s hard to make predictions. I would say that it’ll last less than a week. But that’s in the context of the debt ceiling negotiations coming up again in two or three weeks, and it might get resolved quickly because both sides will actually want to focus on that. So my guess is Republicans might actually give way on this, in order to focus on using the debt ceiling to extract things.

I think that the ultimate outcome of this may be that Republicans don’t get Obamacare delayed or defunded. They might get some sort of marginal adjustment to it. But this will be a good opportunity for Republicans to get all kinds of other things that they want, including rolling back environmental regulations and rolling back financial regulations. The Democrats may actually give these things away in order to keep Obamacare.

What has been the immediate response from the US public and media?

The immediate response has been pretty disgusted. This is the first time that this has happened in nearly 17 years. It was deeply unpopular the last time that it happened, and as well as disgust there’s also been a sense of resignation that this is actually the new normal in the American system: this level of dysfunction; that this use of government shutdown or the debt ceiling as a negotiating tactic has actually become normal.

This is why regard for Congress is so, so low at this point. Barack Obama is struggling with low approval ratings by his standards - something like 45% approval - and that’s within the range of normal for a president. The popularity of Congress overall - when this is surveyed - would struggle to get beyond 15-20%, or probably even less than that - 10-15% of the population are actually approving of the job that they’re doing. So Congress is held in very very low regard at the moment, and this is just seen as another sign of a completely dysfunctional Congress.

The nature of a government shutdown is that the effects are immediately felt by government employees, but for most people the effects don’t become obvious unless it goes on for a little while. So this might not actually affect many people’s lives if it is resolved quickly, but certainly the effect is resigned disgust.

Is Barack Obama trying to divide the Republicans along moderate and Tea Party lines? How successful do you think he will be?

What’s really going on here is that there’s no way that Barack Obama is going to compromise on his signature legislation. And he was always prepared to compromise on tax and spending, no matter how tough he talked about it. But neither he, nor Senate democrats are ever going to compromise on Obamacare. If this doesn’t pass, then there’s really a serious question about what was the point of Obama’s presidency.

In terms of the split within the Republican Party, it’s gone well beyond the point of moderates and Tea Partiers being split. The Tea Party got into the driver’s seat of the congressional Republican Party after the 2010 midterms. And that’s still where it is.

The Tea Party completely terrorise the moderates within the Republican Party to the extent that there are really hardly any recognisable moderates left in the Republican Party. There might be some kind of thinking within the Democratic Party of actually in the long term, this is a good thing: just let the Republican Party become so extreme that it’s unelectable. But it’s going to do a huge amount of damage in the meantime.

Also, there’s not really any evidence that it is going to get to the point of unelectability. Sure, the Republicans may not get a president in the White House for the next 20 years. But they were able to win the last House election without even getting a majority of the vote. And conservative Republicans are very strong at a state level, which is where a lot of the policy that they care about actually gets made.

So, letting the Tea Party dominate the Republican Party is not good from a Democratic perspective. This puts all of their policy aims in jeopardy.

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