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Shutdowns and debt limits: Making sense of the fiscal deadlines ahead

When House Republicans once again made good on their promise Saturday to attach anti-Obamacare provisions to a bill to keep the government funded, the threat of a shutdown became more than just a possibility.

Senate Democrats and President Barack Obama say they won't even consider a bill that touches the Affordable Care Act.

So, all signs point to the lights going off Monday at midnight.

The reality of this looming crisis — coupled with a possible catastrophic default on the national debt in mid-October — has many Americans wondering how we ever got ourselves into this mess. And, more importantly, whether it's too late for Congress to do anything about it.

Here are some of the questions that lawmakers are dealing with – and the possible answers.

What do Congress and the president need to do to meet these deadlines?
On Saturday evening, House Republicans passed a stop-gap measure that would fund the government through mid-December but delay the health care law for a year. It would also repeal a tax on medical devices contained within the law.

The House proposal will be a non-starter in the Democratically-controlled Senate.

Before the House vote, Senate Majority Leader Harry Reid, D-Nev., called it "pointless." He continued, "To be absolutely clear, the Senate will reject both the one-year delay of the Affordable Care Act and the repeal of the medical device tax."

President Barack Obama delivers his weekly address, while focusing on the Affordable Care Act and a government funding bill in Congress.

Even if the Senate wanted to send back another clean extension of the spending bill to the House, that would take some time. And Reid offered no clue as to whether or when the Senate would return; no votes in the chamber are scheduled until Monday afternoon.

What happens if Congress doesn’t pass a spending bill?
There would be a funding shortfall and the executive branch would begin a partial shutdown of federal operations.

Some workers would be furloughed and some agencies would suspend their functions.

The most recent partial shutdown lasted 21 days in late 1995 and early 1996 when President Bill Clinton and GOP congressional leaders couldn’t agree on the terms of a spending bill.

In the aftermath of that showdown, the consensus among both Democratic and Republican strategists was that Clinton emerged stronger, while House Speaker Newt Gingrich and Senate Majority Leader Bob Dole were damaged.

Dole, a reluctant partner in the Gingrich shutdown strategy, said to his chief of staff at the time, “There’s a lot of people (federal employees) not being paid, through no fault of their own. I’ve had enough of explaining away a strategy that makes absolutely no sense.”

What operations would continue even if there was a partial shutdown?
In a briefing for reporters Friday, Defense Department Comptroller Robert Hale said that in the event of a lapse of appropriations, the Pentagon “can only conduct activities designed to protect safety of life and property and carry out a few other activities.”

That means the Pentagon can continue “specific military operations that the secretary of defense has approved: Afghanistan, for example, and a number of others.”

When it comes to entitlements, those are usually  paid for by permanent funding, so according to the Congressional Research Service, in the event of a partial shutdown, Social Security recipients will continue to receive their benefits.

Otherwise, the law allows operations necessary to the safety of human life or protection of property to continue even in the event of a partial shutdown.

In past shutdowns, workers with national security and foreign relations responsibilities – such as CIA and State Department employees – have also been exempted from furloughs, according to the Congressional Research Service.

Other exemptions have included programs and employees related to:

* Inpatient and emergency medical care
* Air traffic control
* Border and coastal patrol
* Care and guarding of federal prisoners
* Emergency disaster assistance

If there was a partial shutdown, what operations would likely be stopped?
During a funding lapse, the Defense Department can’t pay military personnel and civilian personnel, even if they have been directed to work. They would be paid retroactively once Congress passes a spending bill.

The bill which the House OK’d Saturday night would ensure that members of the Armed Forces get paid even if there is a partial government shutdown.

Rep. Peter King, R-N.Y., says he supports what is in a proposed House continuing resolution, but maintains that he does not support a government shutdown.

That legislation also ensures that civilian Defense Department personnel, Department of Homeland Security personnel, and outside military contractors whose jobs involve support of active-duty military members would also get paid as they normally do.

Most of the decisions about suspensions during a shutdown are left to the executive branch. But the Congressional Research Service detailed the closures and suspensions related to the most recent shutdowns.

Some of the fallout:

* New patients weren’t accepted into clinical research at the National Institutes of Health; phone calls to NIH about illness went unanswered.
* The Centers for Disease Control stopped monitoring diseases.
* Testing and recruitment of federal law enforcement officials ceased, including border patrol agents.
* National parks, museums and monuments closed.
* Most U.S. applications for passports went unprocessed.
* Services for U.S. veterans were curtailed.

What’s the debt limit and when is the deadline for that?
Separate from the spending bill impasse is the fight over the debt limit. As it stands now, the government’s legal authority to borrow more money runs out in mid-October.

The congressionally-mandated limit on federal borrowing is currently set at $16.7 trillion. The debt limit has been raised 13 times since 2001 and has grown from about 55 percent of Gross Domestic Product in 2001 to 102 percent of GDP last year.

What would happen if the debt limit were reached?
At that point, the Treasury “would be left to fund the government with only the cash we have on hand on any given day,” said Treasury Secretary Jacob Lew.

Money from tax payments would still be coming in to the Treasury, but it would not be enough to pay each day’s bills. While some bills to vendors and others could be paid, they’d be paid late.

Investors holding Treasury securities might not get prompt re-payment of their principal when their bonds matured. That in turn could cause a downgrading of U.S. Treasury securities by bonds rating agencies.

According to the Bipartisan Policy Center, if that date arrived on October 18, the Treasury “would be about $106 billion short of paying all bills owed between October 18 and November 15 … .”

It estimated that about a third of the funds owed for the period would go unpaid.

Could the Treasury juggle bill payments, paying some vendors and beneficiaries but not others?
According to the Bipartisan Policy Center, the Treasury “might attempt to prioritize some types of payments over others,” but “this option may not be possible to implement using Treasury’s current financial systems. It would involve sorting and choosing from nearly 100 million monthly payments.”

What stands in the way of Congress increasing the debt limit?
There are two big roadblocks. First, House Speaker John Boehner wants additional spending cuts in return for increasing the borrowing limit.

“You can't talk about increasing the debt limit unless you're willing to make changes and reforms that begin to solve the spending problem that Washington has,” Boehner recently said. Obama opposes additional spending cuts, if not paired with tax increases.

Second, Boehner may try to attach other provisions from a Republican "wish list" to the debt ceiling increase -- on matters ranging from blocking greenhouse gas regulations to requiring more cost-sharing by upper-income Medicare recipients.

How does the current spending and debt impasse differ from the one that occurred in the summer of 2011?
Then there was serious bargaining between Obama and Boehner on a deal that might have included both tax increases and curbs in the growth of entitlement spending. Those talks failed.

No sweeping bargain on entitlements and taxes is in sight at this point.

What effect might a partial shutdown and a failure to raise the borrowing limit have on the economy?
A shutdown and even more a failure to raise the debt limit could frighten investors and further destabilize financial markets.

In a recent interview on CNBC, billionaire investor Warren Buffett said if Republicans and Obama were to fail to reach an agreement to raise the nation's borrowing authority, that would be "pretty damn dumb."

And according to Federal Reserve chairman Ben Bernanke, “A government shutdown and, perhaps even more so, a failure to be raise the debt limit could have very serious consequences for the financial markets and for the economy.”

He said the Federal Reserve would “do whatever we can to keep the economy on course. And so if these actions led the economy to slow, then we would have to take that into account, surely.” But he cautioned that “our ability to offset these shocks is very limited, particularly a debt limit shock.”

He urged Congress and the Obama administration to “avoid any kind of event like 2011, which had, at least for a time, a noticeable adverse affect on confidence and on the economy.”


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