US government nears shutdown over spending dispute

08 April 2011 17:31  [Source: ICIS news]

This is the site of the US capitolWASHINGTON (ICIS)--The US government on Friday was poised to shut down as Republican and Democrat leaders in Congress continued to argue about how much to cut from the federal budget in a spending measure that was to fund operations until the end of September.

Republicans in the House of Representatives, who won majority control of that chamber in last November’s elections, have been insisting that funding for the remaining six months of the government’s fiscal year (FY) 2011 should include some $60bn (€42bn) in spending cutbacks.

Democrats, who narrowly retained a one-vote Senate majority in November, want the cuts limited to about $34bn, arguing that federal spending should not be drastically reduced when the country is still struggling to emerge from the recession.

But Republicans, especially a new crop of conservative freshman members of the House, say the cuts are mandated by November’s election results, which were seen as being driven in large measure by public unease over the nation’s $14,000bn debt and continuing deficits of around $1,300bn annually.

The last US federal budget, covering FY 2010, was $3,456bn. Federal revenues for that year totalled only $2,162bn, so the government had to borrow $1,294bn to cover its spending.

Congress last year failed to pass a budget for the current FY 2011, which runs from 1 October 2010 to the end of September this year.

Federal spending from October to the present has been funded by a series of continuing resolutions authorised by Congress. Those funding measures have maintained federal outlays at more or less the same levels as in FY 2010.

The current continuing resolution expires at midnight Washington time (5:00 GMT) on Friday. Unless Congress can agree on a full spending authorisation to cover the last six months of this fiscal year - or pass another short-term continuing resolution - most federal spending would have to come to a halt at that hour.

The dispute over how much to spend over the next six months also involves policy issues.

The budget measure approved by the Republican House includes a provision that would revoke the Environmental Protection Agency’s (EPA) authority to regulate greenhouse gas emissions by the nation’s industries.

Elimination of EPA authority over greenhouse gas emissions has long been favoured by the US chemicals sector and a broad range of other manufacturing industries, agricultural, electric power and general business interests.

Democrats in the Senate and the administration of President Barack Obama oppose the restrictions on the EPA’s authority, and Obama has threatened to veto any such bill that Congress approves.

Although House Republican leaders and top Senate Democrats have held multiple negotiating sessions at the White House over the last three days, they have not been able to find middle ground.

Senate Majority Leader Harry Reid (Democrat-Nevada) accused Republicans of burdening what should be only a spending dispute with an unwarranted policy matter, the limits on EPA authority to regulate greenhouse gases.

In a brief statement to reporters in the Capitol on Friday morning, House Speaker John Boehner (Republican-Ohio) dismissed that charge, saying that negotiations are hung up solely on the spending cuts.

“There is only one reason we do not have an agreement,” Boehner said, “and that is spending. We are very close on the policy issues.”

He charged that the White House and Senate Democrats “have to show the country that they are serious about cutting spending”.

Unless an agreement is worked out before midnight, which seemed unlikely as of midday, the US government would have to begin shutting down non-essential operations and send federal workers home.

The shutdowns would include such government-funded operations as federal parks, museums, some health and medical research facilities, EPA environmental permitting, passport applications processing, and a halt to payments to federal contractors - among many others.

US military and homeland security operations would not be affected.

The previous budget-related shutdown in federal operations occurred in late 1995 and early 1996. It lasted for nearly three weeks and saw the temporary unemployment of some 800,000 federal workers.

($1 = €0.70)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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