News.com.au
By Victoria Craw
As the US shutdown enters its second week, the world's largest economy is just seven days away from default — an unprecedented event experts agree would be cataclysmic for the global economy,
Although staring down the barrel of a catastrophe, Republicans and Democrats are locked in a high stakes standoff, refusing to back down over how to fund the nation.
Overnight, Obama reiterated his position that he is willing to negotiate on budgets and healthcare only once Republicans agree to reopen the government.
The President said he was holding his ground because "we can't make extortion routine as part of our democracy" and once again called on Republican Speaker John Boehner to end the shutdown immediately.
"We're not going to negotiate under the threat of a prolonged shutdown until Republicans get 100 per cent of what they want. We're not going to negotiate under the threat of economic catastrophe that economists and CEOs increasingly warn would result if Congress chose to default on America's obligations," he said during a visit to the Federal Emergency Management Authority this week.
But Republicans are also digging in. House speaker John Boehner — under pressure from Obama because he has the ability to bring a bill to the floor of the House which could end the shutdown today — rebutted calls to pass a budget.
He wants Democrats to negotiate on spending cuts and changes to Obamacare before the government is reopened and the debt ceiling raised.
"Really, Mr. President. It's time to have that conversation before our economy is put further at risk," Mr Boehner said.
Dr Adam Lockyer — a lecturer in US politics and foreign policy at the US studies Centre — said while the crisis is actually two separate issues, the funding debate and the debt ceiling, the two are now entwined in an increasingly bitter debate.
"The tone of the conversation of the budget and shutdown was about bargaining and negotiation now the tone is changing. It's starting to become a case of brinkmanship, they're racing towards one another and it's a case of who's going to blink first," he said.
"It's fairly alarming because the whole point of brinkmanship is you take it to the very edge of destruction and one swerves, but there is a chance one side won't swerve and world will end. You would hope that sanity reigns but you never know."
So who should blink first?
Dr Lockyer said there is no right or wrong, with both sides trying to use their political leverage to gain an advantage.
He said Obama is likely holding his ground because, he thinks, ultimately Republicans won't allow the US to default.
"Obama still thinks the Republicans are rational, sensible. If they do something as reckless as push the US over the debt ceiling without raising it the American people may not forgive them for it" he said.
For the moment, public opinion is behind the President.
A Washington Post and ABC News survey released Monday said public disapproval of Republican handling of the budget showdown was up from 63 per cent a week ago to 70 per cent. Disapproval of Obama's role was unchanged at 51 per cent.
A party divided
Complicating the situation even further is the fact that parts of the Republican Party want the shutdown to end immediately, although extremists are refusing to cooperate.
Alaskan Republican Senator Lisa Murkowski said the party shouldn't dismiss anything out of hand on either the debt ceiling or the shutdown.
"We've got a situation where you've got a calendar running, you've got people who are frustrated and upset, so let's figure it out," she said.
Dr Lockyer said the major is that this is not just a standoff between Republicans and Democrats, it's a "civil war" within the Republican Party between traditional conservatives and the Tea Party movement.
"If you really want to rub a Tea Party Republican up the wrong way you threaten their liberty and threaten to raise taxes. [Obamacare] does both," he said.
But despite the high stakes, the President has no choice but to hold his ground.
"I don't think he will negotiate. It would be the same principle as negotiating with a terrorist. If he was to cave now and say 'it's fine we'll pass a budget without funding Obamacare as long as we pass a budget and raise the debt ceiling' it's only good to December anyway," Dr Lockyer said.
"He will need to go through all of these fights again in the near future. There is nothing stopping the Republicans from doing the whole thing again. He's got to hold firm otherwise he's just going to be held prisoner by the same tactics again and again."
How long could it last?
As the shutdown enters its eighth day there are still hundreds of thousands of people furloughed from work, costing the economy millions.
Among those affected include families of service members killed in action who are typically sent a $100,000 payment within three days to help with costs such as funeral expenses.
However Dr Lockyer said as bad as the shutdown is, the consequences of a debt default would be infinitely worse.
"Between 1976 and 1996 the US government shutdown 17 times for between one and 21 days so 10 days is about normal. We're up to eight days now, this is about normal for a government shutdown. There's no doubt in my mind it will shut down again in future. This happens, but the debt ceiling has never happened, it's considered by most as being far more serious," he said.
"People are talking about huge shocks to stock markets and consumer confidence, right across the board. It will radiate outside US and go crashing into Europe and Asia."
"If the US doesn't raise the debt ceiling, it could be worse than 2008, it could be very bad."
Dr Lockyer said he hopes a potential resolution could separate the issues and negotiate them one at a time.
"There's no reason why the two bills have to be joined ... You might see the debt ceiling being raised without any fanfare. That leaves the government shutdown which is far more visible,"
"This is like gambling with the family car rather than gambling with the family house, it's still stupid but you can survive."
This article was originally published at News.com.au
