Oct 01, 2013

    High tension on Capitol Hill

    WITH a deadline to avert a federal government shutdown fast approaching, Republicans and Democrats waited for the other side to blink first and break an impasse over funding.

    The impasse prompted a sell-off on Asian markets yesterday, with Singapore's Straits Times Index down 1.32 per cent, or 42.31 points, at 3,167.87, Japan's benchmark Nikkei shedding 2.06 per cent and Hong Kong's Hang Seng Index off 1.5 per cent. United States stock futures also fell.

    "Things are far from the 'panic stage', but they don't have to be for investors to be spooked by the apparent intractability of the US political deadlock," said Tachibana Securities market analyst Kenichi Hirano.

    The Republican-controlled House of Representatives early on Sunday passed a measure that ties government funding to a one-year delay of President Barack Obama's landmark health-care restructuring law. Senate Democrats have vowed to quash it.

    If a stop-gap spending Bill for the new fiscal year is not passed before midnight US time yesterday (3pm Singapore time today), government agencies and programmes deemed non-essential will begin closing their doors for the first time in 17 years.

    The funding stand-off is a harbinger of the next big political battle: A far-more-consequential Bill to raise the federal government's borrowing authority. Failure to raise the US$16.7-trillion (S$21-trillion) debt ceiling by the middle of this month would force the US to default on some payment obligations - an event that could cripple its economy and send shockwaves around the globe.

    And, yet, neither side wants to be the one to cast the final vote that would lead to a shutdown.

    Polls consistently show that the American public is tired of political showdowns and opposed to a shutdown.

    There were no signs from Congress or the White House of last-minute negotiations to resolve the stand-off. Instead, Democrats and Republicans spent their energies trying to pin blame on the other side for failing to avoid a calamity.