U.S.

Shutdown showdown: Endgame scenarios

Five ways Washington could deal with political gridlock, fiscal chaos and the looming debt ceiling

The government shutdown that has furloughed hundreds of thousands of federal employees has raised pressure on politicians to break the congressional budget impasse at the heart of the crisis.

The challenge for leaders is further complicated by the looming mid-October deadline for Congress to raise the ceiling on the amount of money the government can borrow or risk a potentially calamitous default on the U.S. national debt. 

Al Jazeera examines the scenarios in which the Capitol Hill showdown could end:

Shutdown Showdown
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Scenario 1: Shutdown continues even after debt-ceiling deal

Many Republican congressional leaders who currently refuse to vote for a budget ending the government shutdown — unless the Affordable Care Act (ACA, aka Obamacare) is defunded or delayed — nonetheless recognize the national and global economic peril of a U.S. debt default. House Speaker John Boehner, for example, has reportedly signaled a willingness to join with Democrats in order to pass legislation raising the debt limit beyond the current $16.7 trillion

Treasury Secretary Jack Lew has said his department would no longer be able to carry out "extraordinary measures" to pay its bills as of Oct. 17 or even earlier. Without extending U.S. borrowing authority, the Treasury could struggle to secure new loans to pay old creditors.

It's possible, however, that Republicans will agree to raising the debt limit while maintaining the budget impasse that forced the shutdown of all but essential government programs.

Seeing the gravity of this imminent threat — and hearing the finance industry's alarmist predictions about the impact of a default — politicians could choose to act to stabilize capital markets by raising the debt ceiling without reaching a budget agreement to restore the paychecks of furloughed government employees. 

Scenario 2: Shutdown continues and U.S. surpasses debt ceiling

If the deadlock in Washington prevents any compromise on either the budget or the debt ceiling, U.S. debt obligations (interest payments) will soon exceed the government's ability to make the necessary payments, risking a debt default.

A recent Treasury report warned that "a default would be unprecedented and has the potential to be catastrophic; credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

A default scenario might also leave the Treasury unable to pay Social Security recipients, government pensioners and holders of U.S. bonds — both at home and abroad.

Ballooning spending on programs such as Social Security and Medicaid and rising interest payments mean that even the steep sequester-mandated cuts in government spending have not prevented the need for further borrowing to keep pace.

Air-traffic controllers, border patrol and meteorologists would remain at work in this scenario, but more than 800,000 workers at NASA, the EPA and elsewhere could remain furloughed without pay and face growing job insecurity.

"As reckless as a government shutdown is," President Obama said Thursday in Rockville, Md., "as many people are being hurt by a government shutdown — an economic shutdown that results from default would be dramatically worse." 

As reckless as a government shutdown is — as many people are being hurt by a government shutdown — an economic shutdown that results from default would be dramatically worse.

Scenario 3: Republicans back down on Obamacare to end shutdown but stand firm on debt ceiling 

A number of House Republicans alarmed by the impact of the shutdown could break ranks with their more conservative colleagues and vote for the Senate version of a resolution to continue funding the government — the version that doesn't contain provisions to defund the ACA.

Yet in this scenario, moving past the first big October hurdle could prompt more-conservative Republican legislators to dig in their heels by attaching their demands for repealing Obamacare to any piece of debt-ceiling legislation.

Failing to raise the ceiling in time would blemish perception of the U.S. government's capacity to pay off existing liabilities and drive up the cost of future debts.

Moreover, the agreed government funding may only postpone another shutdown by six weeks, meaning the country would be back at square one around Nov. 15 — and find itself in the aftermath of a precarious default. This could leave the Republican base frustrated about the limits of its majority status in the House of Representatives.

Do your job
According to polls, less than half of the voting public supports the ACA.
Saul Loeb/AFP/Getty Images

Scenario 4: Republicans give in on shutdown as part of grand bargain on debt ceiling

While this solution appears unlikely for the moment, Congress could be forced to modify its stance upon seeing the ill effects of the shutdown on crucial government services — if the White House were willing to offer something in return. 

Obama has said he is open to negotiation about the budget, as long as the ACA and the country's ability to pay its debts remain unscathed. Republican-favored tax cuts could even be roped into such a far-reaching arrangement.

A key element of a compromise package might be the Federal Employee Retroactive Pay Fairness Act, proposed by Democrats Jim Moran of Virginia and Steny Hoyer of Maryland and Republican Frank Wolf of Virginia. All three are concerned about the many federal workers living in their Washington-suburb districts. 

Scenario 5: Shutdown ends with piecemeal plan and debt ceiling is breached

Some cooperation restores until mid-December certain parts of the federal government that Republicans deem most important — like the Park Service or cancer research at the National Institutes of Health — but most of the shuttered agencies remain offline.

However, with this scenario, the spirit of limited bipartisanship breaks down before a larger pact is reached on the most difficult issues.

Democrats rejected this approach, taken in the House late on Oct. 1, deriding the "wacky" idea of cherry-picking desirable departments. But it's still in the cards if public opinion grows tired of the status quo.

Almost half of Republican voters have said they support a government shutdown to stop the ACA from being implemented, while only 6 percent of registered Democrats agree with this approach.

Despite national polarization, all 17 government shutdowns from 1976 to 1996 eventually ended. Perhaps 2013 will mark the return of this technique to extract concessions from congressional opponents.

Regardless of the outcome of the present shutdown showdown, Washington's follies could be repeated — in November or later — when the fiscal stakes are even higher.

Al Jazeera

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