Concisely, more people should be worried about this Government shutdown. There could be some serious ripple effects!
What’s happened? The budget, or ‘supply’ has been blocked.
Basically, the Americans have the same Bicameral (two Houses of Parliament, Congress and the Senate) system we do, and Legislation has to pass both houses. The budget is a piece of legislation just like any other, most political parties, particularly in Australia, will vote supply through without much fuss, because it’s money for the country to run on.
The Republicans (equivalent to the Liberals in Aus, but more right wing) are refusing to vote through supply, they are ‘blocking’ it. When there is no money for a Government to spend, anything funded by the Government will cease to operate/get paid.
The Public Service
Reimbursed Healthcare (Medicare)
Soldiers deployed overseas
Any public agencies funded by the Government like NASA and the CSIRO
Local and State Governments
In more extreme cases, like if it goes on for a long time, Embassies, Police and Hospitals would be affected too. Anything publicly funded! Private sector companies like Coke, Exxon, McDonalds, Unilever, Johnsons etc are unaffected initially.
The Republicans are blocking the budget because they object to Obamacare, the Democrat’s healthcare reforms, basically the same as our Medicare – the Government reimbursing a percentage of healthcare for all citizens. A good thing, one would think!
It’s a very left wing kind of reform, a kind of welfare for the ‘common good’ of the people/society.
But no, not for the Republicans!
They call Obama a Communist for wanting to give the Government more power/responsibility for Healthcare, so their reaction is to block the Budget.
The deadline is October 17th for a resolution or compromise. If there is none by this date, America will default on their loan from the IMF (International Monetary Fund), which is how all countries get their revenue, by taking out loans and through trade and the value of their currency. If America blocks the budget, they can’t repay the loan, which will cost them more money (interest and default fees). This affects their international credit rating, which can destabilise their currency. If that happens, private sector trade is weakened, investment goes down, revenue goes down, the economy slows (negative growth/economic loss) and a recession starts.
A recession occurs when there is 3 months ( a fiscal quarter) of negative growth in an economy. This slowing of the economy now will impact on any growth they have in the final quarter of 2013.
Internationally, if America goes into a recession, the rest of the world is affected. So many currencies value against the strength of the USD$, and if that dips, so do a lot of other currencies. Globalisation is like a spider’s web, pretty much all he nations of the world are connected, and America would be at the centre with China. Now imagine what happens to the rest of the web when the middle is weakened or removed. Trade would halt and flail globally.
So what is happening in America is pretty serious!
Funnily enough, Australia can relate to this. Supply was blocked twice in the early 1970s under Gough Whitlam. In 1972 the Supply bill was rejected by the Senate 3 times, which is the maximum. When that happens, a Double Dissolution (an out of term election, when both Houses of Parliament are ‘dissolved’ and an election takes place) is called. Whitlam won power back and passed Supply. In 1975 however, Supply was blocked 3 times, but before Gough could go to the Governor General, John Kerr and ask for a Double Disssolution, Opposition Leader Malcolm Fraser convinced Kerr to dissolve Parliament. So Kerr dissolved the Government, ‘firing’ Gough. That’s the skin and bones of what happened anyway!
So Supply getting blocked happened twice in 5 years in Australia, and it caused the biggest contemporary political crisis in our history.
It’s happened 18 times within the last 50 years in America. Eighteen. Give that article a read!
Will their be a quick resolution, PIK?
No, my dear reader, there won’t.
America doesn’t have a Governor General or higher power above the President. Their Constitution isn’t equipped in the same way as the Australian one to deal with situations like these. The Aus Constitution at least describes the powers of the the Governor General. The President can’t override Parliament, that would be non-democratic.
I’ll leave you with this thought:
The Republicans are blocking Obamacare.
Obamacare is based on Healthcare reforms brought in by the State of Massachusetts.
The Governor who brought in those reforms was Mitt Romney, the Republican who ran against Obama in the 2012 Election.
I love irony.
Keep an eye on this crisis!
Hope you enjoyed reading as much as I enjoyed writing!