U.S Congress passes bill to reopen the Government

A possible default by the world’s biggest
economy was averted Wednesday as the
United States (U.S.) Senate approved a
deal to end the government shutdown.
Republican and Democratic Senate
leaders assiduously worked out a deal to
reopen the government and thereby end
the over two week stand-off that assailed
the global economy and put the markets
in dire straits.
Both the Senate and House of
Representatives would have to take
special steps to get the legislation passed
and forwarded to President Barack
Obama’s desk before the government’s
ability to borrow money expires today.
Legislators dropped hints on their way
home on Tuesday that Senate Majority
Leader Harry Reid and his Republican
counterpart, Mitch McConnell, would
quickly finalise a deal that had been in
the works all week.
U.S. stocks opened sharply higher on
expectations that Washington DC would
end its partisan fiscal impasse. The
benchmark Dow Jones Industrial
Average jumped 200 points.
According to sources, under the deal,
the Senate would reopen the
government, funding it until January 15.
It would also raise the debt limit until
February 7 to avert a possible default
on U.S. debt obligations for the first
time.
It also would set up budget
negotiations between the House and
Senate for a long-term spending plan,
and would include a provision to
strengthen verification measures for
people seeking government subsidies
under Obama’s signature health care
reforms.
The focus shifted to the Senate after
House Republicans failed on Tuesday to
come up with a plan, which their
majority could support, stymied again
by demands from tea party
conservatives for outcomes
unacceptable to Obama and Senate
Democrats, as well as some fellow
Republicans.
Today marks the day the Treasury
Department will run out of special
accounting maneuvers to keep the
nation under the legal borrowing limit.
From that point on, it would have to
pay the country’s incoming bills and
other legal obligations with an
estimated $30 billion in cash, plus
whatever daily revenue comes in.
The expectation was that the Treasury
would be able to pay bills in full for a
short time after today, but exactly how
long remained unclear.
According to the best outside
estimates, the first day the
government will run short of cash could
come between October 22 and
November 1.
The prospect of the U.S. government
running out of money to pay its bills
and eventually finding it difficult to
make payments on the debt itself, has
economists around the world
prophesying dire consequences.
Mutual funds, which are not allowed to
hold defaulted securities, may have to
dump masses of U.S. treasuries.
Ratings agency Fitch fired a warning
shot on Tuesday that it might
downgrade the country’s AAA credit
rating to AA+ over the political
brinksmanship and bickering in
Washington that have brought the
government to this point.
That could help raise interest rates on
U.S. debt, putting the country deeper
into the red.
Rating agency Standard & Poor’s cut
the U.S. credit rating from AAA to AA+
after the 2011 debt ceiling crisis.
Moody’s still has the U.S. rated AAA.
Investors around the world appeared
to be sitting on the sidelines yesterday,
waiting for the day’s debate.
Asian markets ended with mixed
results, European markets were down
slightly Friday afternoon and U.S. stock
futures — frequently taken as an
indicator for how U.S. markets will
open — were up marginally before
trading began yesterday.
Several options were being weighed
before the eventual breaking of the
deadlock.
Some scholars, for instance, had
suggested that the 14th Amendment to
the Constitution gives Obama an
emergency brake to stop the default
by ignoring what Congress does and
borrowing in spite of having reached
the debt ceiling.
Section four of the amendment states:
“The validity of the public debt of the
United States, authorised by law,
including debts incurred for payment
of pensions and bounties for services in
suppressing insurrection or rebellion,
shall not be questioned.”
Obama has rejected such claims, the
Congressional Research Service has
said. And other scholars said that by
invoking the 14th Amendment in this
way, the President would risk breaking
other laws.
Disarray among House Republicans
caused confusion on Tuesday, with
Boehner having to pull a proposed
agreement from the floor because
conservatives found it too weak.
The House proposal dropped some
provisions on Obamacare but
prohibited federal subsidies to the
President and his administration
officials as well as federal lawmakers
and their staff receiving health
insurance through the Affordable Care
Act programs.
It also would have forbidden the
Treasury from taking what it calls
extraordinary measures to prevent the
government from defaulting as cash
runs low, in effect, requiring hard
deadlines to extend the federal debt
ceiling.
Hints that the standoff would be
resolved emerged early in the week,
with the softening of stance from some
opposition members.
For instance, Senator John McCain, who
was the Republican 2008 presidential
nominee, was quoted by the New York
Times as saying: “Republicans have to
understand we have lost this battle, as
I predicted weeks ago, that we would
not be able to win because we were
demanding something that was not
achievable.”
The White House had refused to
negotiate over its healthcare law,
pointing out that it was passed in 2010,
subsequently validated by the Supreme
Court and was a central issue in the
2012 presidential election, which
Obama won comfortably.
Stalemates between Congress and the
White House over spending have
existed since the government began,
but they became more severe during
the 1970s, leading to an increased
number of stopgap spending
agreements. From that ensued
increasingly protracted fights over how
to fix those spending gaps, and the
spending bills became proxies for
other policy battles.
Speaking recently on the shutdown’s
impact on Nigeria and other African
countries, a U.S. presidential aide
assured of continued policy support in
investment and funding regardless of
budget disagreement in its congress.
Assistant secretary for African Affairs,
Linda Thomas-Greenfield, told African
journalist via a live web chat that key
U.S. agencies would still provide
economic, developmental and
humanitarian assistance to the
continent.
She said: “The (U.S.) State Department
and the United States Agency for
International Development (USAID) are
major funders on the continent of
Africa and national security agencies.
“And because of that we are able to
continue operations. Most of our
funding right now is 2013 funding and
that funding will continue.”
She assured that the U.S. agencies
were committed to an evolving model
of partnership with governments for
African growth.
The American presidential aide
underlined her country’s collaboration
with others in combating insurgents
and terrorist groups like Boko Haram.
She noted that the three major
developmental policies announced
recently by Obama namely, Power
Africa, Trade Africa and the Young
African Leaders Initiative (YALI), were
aimed at boosting electricity supply,
trade as well as skills and capacity of
young people on the continent.