Posted on October 3, 2013 · Posted in Frank Friday, P-cubed News

This week all eyes are on Washington and the federal government shutdown–the first in almost two decades–as a result of the failure of lawmakers to break the long-standing impasse in budget negotiations. The closure of the government has sent over 800,000 federal workers on furlough and more than a million other workers are expected to have to work without compensation. The impact of this political stalemate is being felt across the country: national parks are closed, including the Statue of Liberty, and federal agencies like Commerce, Labor, and the Treasury, among others have had to significantly reduce operations for the period of the shutdown. 

The federal closing is a complicated story. Here’s a quick look at what this is about. The prospect of a closure has loomed for several months. A core group of House Republican leaders have held firm that their support for financing the government is tied to the administration agreeing to a one-year delay in the mandate that requires individuals to buy health insurance under the new Affordable Care Act. The House’s proposal also calls for denying subsidies through generous tax credits to all members of Congress, Capitol Hill staff, political appointees of the President, White House staff, the President and Vice President, who would all be obliged to pay the entire cost of health care out of pocket.

The Democratic majority Senate has steadfastly refused to tie-in budget negotiations or even the six-week stopgap spending bill with contractions in the Obamacare plan. And, hence, the protracted gridlock.

More worrisome than the shutdown is the approaching October 17th fiscal cliff deadline when the government will reach its debt ceiling. Unless Congress acts and raises the limit on federal government borrowing, the U.S. is at risk of an unprecedented default in making payments. Without action on the debt ceiling, the Treasury will be left with only $30 billion in cash, which is expected to be used up in mere days. To give you a sense of how critical the current situation is, the Bipartisan Policy Center, in a recent report that analyzed U.S. debt, shows that the government is looking at several big bills in the coming weeks: the Treasury is facing a $12 billion Social Security payment on Oct. 23, a $6 billion interest payment on the public debt on Oct. 31, and on November 1st itself a payment of $18 billion on Medicare, $25 billion on Social Security, $12 billion on military pay and veterans benefits and $3 billion on the Supplemental Security Income program.

The implications of a debt-ceiling default are enormous. Financial analysts have warned that the economy and financial markets–globally–will feel the impact of the crisis in Washington. If no agreement is reached by the October 17th deadline, the government will be forced to make short-term decisions like prioritizing payments, issuing i.o.u.’s, selling off gold and other assets, none of which are sustainable options. Another strategy that is being discussed would be for President Obama to invoke the 14th Amendment by executive fiat that would allow the federal government to keep borrowing and avoid a default on payments.

Getting out of this mess requires leadership from all sides, good faith efforts to break the current political gridlock that has gripped the nation’s capital, and a commitment to put the people of this country above the bitter divisions of partisan politics, ideology, and brinkmanship that we have seen in recent days.

Tell us where you stand on the current debates in our political arena. What is the nature of the leadership that we need in Congress to bring us out of this current crisis? What can we expect in the coming days?

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Be well.

Best wishes,