The U.S. Shut Down: A Primer

SHUTDOWN

Everybody is curious about what exactly is this shut down in the US. I would like to provide the basic understanding of the issue.

THE BACKGROUND

The run-up to this problem started with a health care reform act – The Patient Protection and Affordable Care Act also known as Obamacare as it was signed by President Obama in March 2010.

The act aims to provide affordable health care especially subsidized and affordable health insurance.

According to the official page for this act, following are the facts worth knowing..

• The Affordable Care Act contains over a thousand pages of reforms to the insurance industry and the health care industry in order to cut health care costs and to provide affordable health insurance to all Americans.

• There are around 44 million Americans who currently are unable to get health insurance. One of the major things ObamaCare does is help these individuals to get health insurance through expanding Medicaid and Medicare and offering cost assistance to Americans who cannot currently afford health care.

• Most Americans will have to have health insurance by January 1st, 2014 or pay a fee on their year-end taxes. Many Americans will be eligible for subsidized health insurance costing anywhere from 0% – 9.5% of their taxable income. Subsidized insurance can be purchased through the Health Insurance Marketplace.

THE STANDOFF

The US legislative body Congress consists of a House and a senate.

The US Financial year runs from October 1 to September 30.

The Budget for the next financial year must be passed before September 30 to enable the government to function properly.

The US congress is dominated by two major parties : the Republicans and the Democrats.

President Obama is a democrat.

The budget must be passed by both the House and the Senate. While Democrats are in majority in the Senate, the Republicans are in majority in the House.

For the budget to be passed it must be approved by both the senate as well as the House.

While the Senate approved the budget the republicans did not pass it as they are objecting the Health care act.

THE SHUT DOWN

As the budget has not been passed in time, the government doesn’t not have money to pay salaries and meet other expenditures.

In the US the government employees have been classified into 1) essential and non essential.

With the shut down in effect, the non essential employees by default proceed to leave without pay.

However, by signing an emergency legislation on Monday, the President has ensured, the essential services like the US military services would continue.

THE IMPACT

Research firm IHS estimates that it’s costing the US government about $300m a day, for each day of the shut down.

Goldman Sachs estimates a three-week shutdown could shave as much as 0.9% from US GDP this quarter.

National parks have been closed to new visitors, and park roads, concessions and other facilities are now being closed. Overnight visitors have been given two days to depart. This will mean a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

Most popular tourist spots in the nation’s capital closed on Tuesday. Barricades went up around some iconic locations, including the Lincoln Memorial, the Library of Congress, the National Archives and all Smithsonian museums. The National Zoo is closed and its popular live animal webcams were taken off line. All zoo animals will continue to be fed and cared for.

THE WAY OUT

The only way out is that the differences are ironed out and the house agrees to pass the budget. Till than the US will continue to be in dire straits.

Hope this helped you.

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