The US Capitol is seen on September 28, 2013 in Washington. US President Barack Obama warned his opponents in Congress that he would not back down in the face of their threat to shut down the government over a budget dispute.'My message to Congress is this. Do not shut down the government, do not shut down the economy, pass a budget on time, pay our bills on time,' Obama said. The standoff on Capitol Hill is showing no signs of being averted before an October 1 deadline, and Obama warned Republi
WASHINGTON (AP) - Just as the U.S. economy is struggling to expand at a healthy pace, a pair of political standoffs threatens to slow growth and spook investors.
Unless Congress acts before Tuesday to fund federal spending, some of the government would shut down. Separately, the government will run out of money to pay its bills by late October unless Congress raises the federal borrowing cap. A 2011 fight over the borrowing cap rattled consumers, businesses and investors and likely slowed growth.
Here are questions and answers about how the two standoffs, now intertwined, could affect the economy and financial markets:
Q. What exactly will happen within the next days and weeks?
A. The most urgent deadline is for Congress and the White House to agree to keep funding the government after the current budget year ends Monday. Otherwise, some of the government would have to shut down. The House and Senate are considering bills to fund the government past the deadline. But House Republicans want to cut off funding for President Barack Obama's health care law as a condition of passing the spending measure. Senate Democrats and the White House have balked. Unless one side essentially blinks, a partial shutdown of the government will occur.
Q. What would be the effect on the economy if the two sides miss the deadline for passing the spending measure?
A. About one-third of the government will shut down. About 800,000 of about 2.1 million federal employees will be sent home without pay. National parks will close.
NASA will continue to keep workers at Mission Control in Houston and elsewhere to support the International Space station, where two Americans and four other people live. Aside from that only about 3 percent of NASA's 18,000 workers will keep working.
The military and other agencies involving safety and security would continue to function. These include air traffic controllers, border patrol and law enforcement officers. Social Security, Medicare and veterans' benefits payments would continue, but there could be delays in processing new disability applications.
A partial shutdown that lasts no more than a few days wouldn't likely nick the economy much. But if the shutdown were to persist for two weeks or more, the economy would likely begin to slow, economists say.
Extended closures of national parks would hurt hotels, restaurants and other tourism-related businesses. Delays in processing visas for overseas visitors could interrupt trade. And the one-third of the federal workforce that lost pay would cut back on spending, thereby slowing growth.
A three-week shutdown would slow the economy's annual growth rate in the October-December quarter by up to 0.9 percentage point, Goldman Sachs estimates. If so, the growth rate next quarter would be a scant 1.6 percent, compared with the 2.5 percent that many economists now forecast.
The contingency plans for various government agencies are available at
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