(For more on the shutdown, see EXT2.)
Sept. 30 (Bloomberg) -- The U.S. government was on the verge of its first shutdown in 17 years, as House and Senate lawmakers failed to agree on a spending plan for the new fiscal year that starts at midnight.
Republicans and Democrats lobbed dead-end proposals across the Capitol well into the evening, with neither party showing any sign of compromise or concession on a stopgap spending measure.
Senate Majority Leader Harry Reid said at about 11 p.m. in Washington that his chamber won’t start formal talks with the House until Republicans accept the Senate bill. House Republicans then began the process of negotiation, though with no chance of meeting the midnight deadline.
“A shutdown is unavoidable,” said Representative Jim McGovern, a Massachusetts Democrat.
The House voted 228-201 to pass its third version of a short-term extension of government funding in the past 10 days. Each attempt linked averting a shutdown to major changes to the 2010 Affordable Care Act, and each drew veto threats from President Barack Obama.
About an hour later, the Senate rejected that plan on a 54-46 vote, putting pressure on House Speaker John Boehner and the Republicans.
“They’ve lost their minds,” said Reid, a Nevada Democrat. “They keep trying to do the same thing over and over again.”
The House will seek a conference committee with the Senate, said Representative Pete Sessions, chairman of the House Rules Committee. That won’t yield a deal in time to prevent at least a temporary shutdown.
Republicans said Democrats were unwilling to negotiate and Democrats said the House was trying to extort policy changes on a plan that would, at most, keep government open through Dec. 15.
The White House Office of Management and Budget, facing its own procedural deadline, must have determine by 11:30 p.m. tonight Washington time whether to instruct agencies to begin implementing their shutdown plans after midnight, according to an Obama administration official familiar with the planning who asked not to be identified.
Hours after talking by phone with Obama, Boehner urged the House to pass its latest plan. It delays by a year the mandate that uninsured individuals buy health coverage and prevents the government from making contributions to the health care of lawmakers, their staffs and political appointees.
“This is not about me,” the Ohio Republican said on the House floor. “And it’s not about Republicans here in Congress. It’s about fairness for the American people.”
Even as Republicans such as Representative Peter King of New York complained about the party’s strategy, they were relatively united. On the latest proposal, 12 Republicans voted no; nine Democrats voted for the plan.
Obama called Boehner this evening and they spoke for almost 10 minutes, Brendan Buck, a spokesman for the speaker, said in a statement. Obama also spoke to the other top three leaders in Congress, the White House said in a statement. There were few signs of progress toward an agreement.
“You don’t get to extract a ransom for doing your job, for doing what you’re supposed to be doing anyway or just because there’s a law there you don’t like,” Obama said at the White House today. “Time’s running out.”
The Senate voted 54-46, along party lines, earlier today to reject the House’s previous plan, in a move that put pressure on House Republicans, who are insisting on tying changes in the 2010 Affordable Care Act, now known as Obamacare, to a short- term extension of government funding after tonight.
Senate Republicans floated the idea to extend by one week the funding deadline to avert a shutdown. Reid said no. Democrats urged Boehner to allow a vote on a spending bill without conditions.
“That’s not going to happen,” Boehner said.
Concern that a shutdown would stunt economic growth sent stocks lower, trimming the biggest quarterly gain since the start of 2012, and the yield on 10-year Treasury notes traded at an almost seven-week low.
The Standard & Poor’s 500 fell 0.6 percent to 1,681.55 at 4:19 p.m. in New York. All 10 main industries in the S&P 500 dropped, with consumer goods, oil and gas and financial shares falling the most.
“A shutdown will have a very real economic impact on real people, right away,” Obama said.
The Republican proposal includes a one-year delay of the individual mandate to buy health insurance and end government contributions to coverage for lawmakers and congressional staff.
Representative Nancy Pelosi, the House Democratic leader, compared Republicans’ focus on the health law to “hounds baying at the moon” and said that she was willing to accept government funding levels she opposes.
“You and that attitude are a luxury this country cannot afford,” said Pelosi, a California Democrat.
Congress, which has stumbled to fiscal deadlines repeatedly in the past three years, could still find an 11th-hour compromise. Hanging in the balance are 800,000 federal workers who would be sent home if Congress fails to pass a stopgap spending bill before funding expires.
The fallout in U.S. government services would be far- reaching: national parks and Internal Revenue Service call centers probably would close. Those wanting to renew passports may have to wait and the backlog of veterans’ disability claims might increase.
The Senate cleared a separate bill, later signed by Obama, \to ensure that U.S. troops along with some civilians and contractors are paid if the government shuts down. The House unanimously passed the plan early yesterday and it now heads to Obama.
The political implications are much less clear. Democrats are painting Republicans as obstructionists who are trying to undo a law passed by Congress, upheld by the Supreme Court and ratified by Obama’s re-election in 2012. Republicans say they are trying to save Americans from the effects of the law and that Democrats won’t negotiate.
“I don’t want to shut the government down but I also want to protect my constituents from this law,” said Representative Richard Hudson, a first-term Republican from North Carolina. “So I’ll do whatever it takes.”
In a government shutdown, essential operations and programs with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments.
A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers.
--With assistance from Derek Wallbank, Caitlin Webber, Heidi Przybyla, Roger Runningen, Danielle Ivory, Kasia Klimasinska, Peter Cook, Laura Litvan, Leslie Hoffecker, Margaret Talev, Michael C. Bender and James Rowley in Washington, Emma Oliver and Lars Paulsson in London, Takashi Hirokawa in Tokyo and Kyoungwha Kim in Singapore. Editors: Jodi Schneider, Michael Shepard