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and was a central issue in the 2012 presidential election, which Mr Obama won decisively. House Republicans have already voted 42 times since the legislation was passed either to repeal it or to strip its funding. Who is affected? Ten minutes before midnight on 30 September, the White House budget office issued orders for government offices to start shutting down, with workers told to stay at home without pay. This affects all "non-essential staff", which by some estimates is more than 700,000 of the total 2.1 million-strong federal workforce. National parks, museums, federal buildings and services will all be closed. Pension and veterans' benefit cheques could be delayed. Air-traffic controllers, active military personnel, and border security guards are to be told to report for work. Even some of the White House staff might have to stay at home and all Smithsonian institutions in Washington are to close. However, workers like teachers, firefighters and doctors will continue to be paid, as they are paid for by the state, not the federal government. What is the likely economic impact? It depends on how long it takes for Congress to thrash out an agreement on the budget, which could take days or weeks to play out. The US government has experienced 18 shutdowns in the past 30 years, with the latest one lasting 21 days under US President Bill Clinton in 1995, costing the economy over $1bn. If the Democrats and Republicans reach a deal on the budget within a day or two, the negative effect on the recovery of the US economy will be fairly limited. According to IHS estimates, the daily cost in lost output will be just $300m, which is trivial for an economy whose annual output is 52,000 times greater. However, the daily impact of the economic shutdown may accelerate if it affects confidence and consumer spending, especially with hundreds of thousands of workers left unpaid. If the shutdown were to last about three weeks or so, Goldman Sachs estimates it could shave as much as 0.9% from US GDP this quarter. There would also be an impact on tourism with difficulties renewing passports and driving licences, meaning the transport and travel industries would also take a hit. It will also impact on government workers, who may have to dip into their savings or delay mortgage payments and any other spending until unpaid leave ends. The real concern is if the shutdown spills over into mid-October, when the legislative branch has to agree on raising the federal government's borrowing authority. What's next? How will it be resolved? There are a few ways out of the shutdown: Congress could pass a clean bill on the budget that does not tamper with the Affordable Healthcare Act, the Senate and Democrats could accept changes in the health law, or a compromise could be reached. The Republican-led House has called for a conference - a bipartisan committee with the Senate - to try to thrash out a deal. But for many, the 1 October deadline was less worrisome than what could happen come mid-October, which is when, once again, the US government could default on its debts. Congress will need to meet a crucial deadline on 17 October to raise the government's $16.7 trillion debt ceiling - the limit at which it can borrow money to pay its bills.
Already, US Treasury Secretary Jack Lew has had to engage in what's known as "creative accounting" to keep paying the nation's bills after federal borrowing surpassed the $16.7 trillion limit in May. Unfortunately the US government and Republicans are in stalemate over extending the credit limit needed to avoid default. Over the past three years, the debt ceiling has been used as a negotiation point for House Republicans who have sought to extract budget concessions from Mr Obama. The biggest drama came in August 2011, when last-minute posturing by both sides led ratings agency Standard & Poor's to downgrade the credit worthiness of US debt, a historic first. Should the world care? Global stock markets fell and the dollar dropped against major currencies with the prospect of a shutdown on 30 September. However, so far the markets have responded relatively mildly since the shutdown went into force. In any case, the impact of the shutdown will most likely be gradual and incremental. In the event that it continues for several weeks, UK economic recovery may be impacted most as America is its single biggest export market. But even if the House and Senate manage to pass a three-month federal funding bill, what happens when the nation hits its debt limit is anyone's guess. The US has never defaulted on its debt before, and to do so would almost surely result in extreme global market volatility. BBC Business editor Robert Peston says if the world's richest economy fails to pay its bills and US official and quasi-official debts are consequentially downgraded, it "would precipitate unthinkable turmoil in markets".
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