Thursday, October 03, 2013

Default Danger

 President Obama has warned that Wall Street should be concerned that a conservative faction of Republicans is willing to allow the country to default on its debt. He said he would not hold budget talks with Republicans until they allowed the US government to reopen and pass a bill to raise the US borrowing limit. He said he was "exasperated".

The US government closed non-essential operations on Tuesday after Congress failed to reach a new budget deal.
"I think it's important for them to recognize that this is going to have a profound impact on our economy and their bottom lines," Mr Obama said in an interview on CNBC following a meeting with US financial sector leaders.

Mr Obama said he was unwilling to negotiate "with the extremist wing of one party" as the 17 October deadline to raise the nation's borrowing limit nears.
"The message I have for the [Congressional] leaders is, as soon as we get a clean piece of legislation that reopens the government... until we get that done, until we make sure that Congress allows [the Department of the Treasury] to pay for things that Congress itself already authorized, we are not going to engage in a series of negotiations," he said.

Mr Obama said Republican House Speaker John Boehner was unable to say no to "a small faction" of the Republican Party, and if a few people "are allowed to extort concessions" then any president who followed him would find himself "unable to govern effectively".

The president cancelling his Asia trip suggests the shutdown won't be over soon. All the signs are that neither side is preparing to blink. But Obama has a strategy - the Republicans have a problem. First they wanted to stop Obamacare, then delay it, then delay part of it. The messy, shifting Republican message won't get through, except to their hardline base.
But Obama has firmly linked this crisis to a much worse one. The threat not to raise the US debt ceiling is appalling and terrible for the world economy. It is likely Democrats will tie both issues together and insist there is no point reopening the government unless the debt ceiling is sorted out.
Being invited to take part in grand negotiations about the whole of the government's finances could give Republicans a face-saver. For the president, dealing a fatal blow to "government by crisis" would be a big prize.

US spy chief: Shutdown 'damaging'

James Clapper: "This seriously damages our ability to protect the safety and security of this nation"

Senior US intelligence officials have warned the shutdown of the US government "seriously damages" spy agencies' ability to protect the US. Director of National Intelligence James Clapper told a Senate panel that an estimated 70% of intelligence workers had been placed on unpaid leave. Also, the head of the US electronic spy agency said morale had been devastated. The US government closed non-essential operations on Tuesday after Congress failed to reach a new budget deal.
Mr Clapper appeared before a Senate judiciary committee hearing on Wednesday, warning lawmakers the damage to US intelligence capabilities caused by a shutdown would be "insidious".
"This is not just a Beltway issue," he said, referring to the Washington DC area. "This affects our global capability to support the military, to support diplomacy, and to support our policymakers."

Mr Clapper also warned that foregoing paying employees during the shutdown could cause them financial hardship, making them inviting targets for foreign spies.
"This is a dreamland for foreign intelligence services," he said.

Gen Keith Alexander, director of the National Security Agency, said the electronic spying agency had placed thousands of mathematicians and computer scientists on unpaid leave.
"Our nation needs people like this," he said. "And the way we treat them is to tell them, 'you need to go home because we can't afford to pay you, we can't make a deal here.'"

The government shutdown has left more than 700,000 employees on unpaid leave, and closed national parks, tourist sites, government websites, office buildings and more. Obama accused Republicans of demanding "ransom" for doing their job and keeping the government running. It came after weeks of wrangling between Democrats in the White House and Senate and the Republicans who control the US House of Representatives.

House Republicans have demanded repeal, defunding or delay of a healthcare law passed in 2010 by the Democrats as a condition for continuing to fund the government. Mr Obama and the Democrats have refused, leading to the current morass. The spy chiefs' remarks came after the White House announced Mr Obama would cut short a planned four-nation tour of Asia next week.

The view on the shutdown from deserted landmarks and government buildings in Washington and New York

He had been scheduled to begin his Asian trip on Saturday, heading to Bali for an Asia-Pacific Economic Co-operation (Apec) summit and to Brunei for the East Asia summit before travelling on to Malaysia and the Philippines. On Wednesday the White House said Mr Obama looked forward to visiting those two nations "later in his term".

National Security Council spokeswoman Caitlin Hayden called the trip cancellation "another consequence of the House Republicans forcing a shutdown of the government".
"This completely avoidable shutdown is setting back our ability to promote US exports and advance US leadership in the largest emerging region in the world," she said.

What does shutdown mean for two million federal employees, agencies and tourist destinations?
The US government ceased operations deemed non-essential at midnight on Tuesday, when the previous budget expired.

President Obama has blamed conservative Republicans in the House of Representatives for the government shutdown, saying "one faction of one party" was responsible because "they didn't like one law".
"They've shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans," Mr Obama said.

Republican House Speaker John Boehner has accepted an invitation to a meeting at the White House, currently scheduled for 17:30 local time (21:30 GMT).
"We're pleased the president finally recognizes that his refusal to negotiate is indefensible," said his spokesman Brendan Buck.
"It's unclear why we'd be having this meeting if it's not meant to be a start to serious talks between the two parties."

Senate Republican leader Mitch McConnell, as well as Democratic Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, are also expected to attend. Analysts say Mr Boehner could end the showdown by allowing the House to vote on a "clean" budget bill that does not alter the health law, because that could pass with a coalition of Democrats and moderate Republicans.

But doing so would risk his standing with the most conservative elements of his caucus, analysts say.
An opinion poll released on Tuesday suggested the American public disagreed with the Republican strategy.
An estimated 72% of voters opposed Congress shutting down the federal government in order to block the health law, according a poll by Quinnipiac University.

The next key fiscal deadline in the US is 17 October, when the government reaches the limit at which it can borrow money to pay its bills, the so-called debt ceiling. House Republicans have demanded a series of policy concessions - including on the health law and on financial and environmental regulations - in exchange for raising the debt ceiling.

President Obama is due to meet the heads of some of Wall Street's biggest banks - including JPMorgan Chase, Goldman Sachs and Bank of America - to discuss the debt ceiling and other economic issues. The bankers are members of the Financial Services Forum, a lobbying group which has, along with 250 other businesses, sent a letter to Congress urging it to raise the debt ceiling.

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