Deadline Missed, U.S. Slides into Government Shutdown

The United States lurched into a dreaded government shutdown early Tuesday for the first time in 17 years, triggering agency closures and hundreds of thousands of furloughs as Congress missed a deadline to pass a budget.

Ten minutes before midnight bells rang throughout a deeply divided Washington, and after a day of furious brinkmanship President Barack Obama's Democrats and rival Republicans, the White House ordered federal agencies to initiate their shutdown procedures.

"We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year," Management and Budget director Sylvia Mathews Burwell said in a memo to agencies.

Lawmakers had hardly haggled over budgetary matters in the final frantic hours before the deadline -- the end of the fiscal year. Instead, they argued over whether to link the budget pact with efforts to delay Obama's health care law.

"This is an unnecessary blow to America," Senate Majority Leader Harry Reid said on the Senate floor two minutes after the witching hour.

As a mood of crisis enveloped Washington no compromise emerged to head off the first such disaster since 1996.

Instead, the Democratic-led Senate and Republican House of Representatives played a futile game, sending funding bills between them that were doomed to fail.

Obama accused Republicans of holding America at ransom with their "extreme" political demands, while his opponents struck back at his party's supposed arrogance.

Around 800,000 government workers are expected to be sent home, government services are to be slashed and monuments such as the Statue of Liberty and national parks will close.

The crisis is rooted in an attempt by "Tea Party" Republicans in the House to make passage of a new government budget conditional on thwarting Obama's signature health reform law.

The Democratic-led Senate and the president have repeatedly rejected this strategy and urged Republicans to pass an extension to government funding to temporarily stave off the shutdown.

In a deeper sense, the shutdown is the most serious crisis yet in a series of rolling ideological skirmishes between Democrat Obama and House Republicans over the size of the U.S. government and its role in national life.

"One faction of one party in one house of Congress in one branch of government doesn't get to shut down the entire government just to re-fight the results of an election," Obama said, referring to his own re-election.

"You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway," he said, in a stern televised statement at the White House.

But on a day of accelerating brinkmanship, Republicans doubled down on their bid to gut Obamacare, as the health care law, the most sweeping social legislation in decades, is known.

With just three hours to go, House lawmakers passed a bill that would delay the individual mandate, which forces all Americans to buy health insurance under the new law, for a year.

"It's a matter of fairness for all Americans," said Republican House speaker John Boehner, who has struggled to control the riotous anti-government Tea Party faction of his caucus.

But the Senate, which must also sign off on budget measures, immediately rejected the bill.

That led House leaders, less than an hour before midnight, to move to go to conference, meaning the two chambers would appoint formal negotiators to thrash out a budget deal.

That process was already showing signs that it would take hours to coordinate, and Reid sent the Senate into recess until 9:30 am Tuesday.

"We said we'd go to conference if they wouldn't shut the government down, but they're shutting the government down," number two Senate Democrat Dick Durbin told AFP.

Obama warned that a government shutdown could badly damage an economy which has endured a sluggish recovery from the worst recession in decades.

"A shutdown will have a very real economic impact on real people, right away. Past shutdowns have disrupted the economy significantly," Obama said.

Consultants Macroeconomic Advisors said it would slow growth, recorded at a 2.5 percent annual pace in the second quarter.

A two-week shutdown would cut 0.3 percentage point off of gross domestic production.

It would also have a painful personal impact on workers affected -- leaving them to dip into savings or delay mortgage payments, monthly car loan bills and other spending.

Stocks on Monday retreated as traders braced for the shutdown. The Dow Jones Industrial Average was down 128.57 points (0.84 percent) to 15,129.67.

Markets are likely to be even more traumatized if there is no quick solution to the next fast approaching crisis.

Republicans are also demanding Obama make concessions in the health care law to secure a lifting of the current $16.7 trillion debt ceiling, without which the United States would begin to default on its debts for the first time in history by the middle of October.

Polls show more Americans would blame Republicans for the shutdown than Democrats, leaving Boehner torn between his party's wider political interests and a vocal section of his own party.