The US shutdown

United States President Barack Obama is facing a situation that may yet define his presidency.

Forget about the introduction of Obamacare through the Affordable Care Act. Forget that millions of Americans have access to medical insurance that was once out of reach.

Forget that seemingly the majority of elected representatives in the US Congress appear willing to broker a deal to stop the US from defaulting on its debt.

Instead, consider the global influence of a minority in the Republican Party.

The reason for the US shutdown is that Tea Party elements of the ''Grand Old Party'' resent the affordable healthcare package Mr Obama pushed through the Senate and the House of Representatives.

He has a majority of Democrats only in one part of the bicameral system, and getting the main plank of his election policy through is an achievement, something no other Democrat president has achieved.

The Act came into effect on October 1, and yet the fight to stop it continues. Defeated Republican presidential candidate John McCain has provided a voice of reason, saying the GOP strategy of trying to repeal Obamacare did a great disservice by suggesting that was even possible.

The Republicans started from a false premise. Mr McCain suggested Republicans could accept a smaller victory, such as a repeal of the new tax on medical device manufacturers, which is part of the Act.

The fight has now moved from funding the Budget to lifting the US debt ceiling above the current $US16.7 trillion ($NZ20.12 trillion). Mr Obama says that without lifting the ceiling, the US will default on its debts.

This will have a catastrophic effect on global markets. Interest rates will rise, the US will receive another ratings downgrade and US sharemarkets will fall in value.

However, a surprisingly broad section of Republicans is convinced the threat - once taken as an economic fact - may not exist, or at least may not be so serious. Some question the Treasury's deadline of October 17.

Others say there is no deadline at all, with daily tax receipts enough to pay off Treasury bonds as they come due.

Hard-line Republicans say the president is being irresponsible in scaring markets. They argue the fallout from the continuing shutdown and the automatic, across-the-board budget cuts known as sequestration has been less severe than predicted.

In fact, conservative economists now argue forcing the Government to operate within its income is a reasonable idea.

There has been a suggestion more liberal House Republicans are prepared to back President Obama's call for the debt ceiling to be raised, but that appears increasingly unlikely.

Last year, some of those more traditional Republicans were rolled from their seats, one after 16 terms, by hard-liners.

Those wanting to retain their seats in 2014 are being told their fate rests in supporting the wealthy and influential Tea Party's calls for the funding freeze.

In New Zealand, government debt has grown exponentially in the past few years, with the Government still borrowing about $100 million a week. While the accounts appear likely to return to surplus by 2014-15, debt remains a problem and will remain so for many years.

Governments need to live with their means, eventually. But the current standoff in the US remains a concern for more than just those in charge of the world's largest economy.

As an example of the world-wide impact of the US shutdown, their bases in Antarctica have been forced into caretaker mode and research efforts suspended. Staff are likely to return to New Zealand on Monday.

That is not good news for New Zealand researchers, who rely on support from their US counterparts during the summer months.

The loss of this season's programmes, some planned for many years, is unprecedented and tragic for the Antarctic community and the understanding of the region and its changing environment, Prof Peter Barrett, from Victoria University's Antarctic Research Centre, says.

The US National Science Foundation says it will do its best to resume research programmes when funding is eventually restored, but concedes this will not be possible in every case.

Half a world away, the funding debate in the US is interrupting vital work being carried out by scientists in Antarctica.
If there is any doubt about how far-reaching is the fight between Mr Obama and the GOP, let it be put to rest.

 

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