The US government is nearly out of time to agree the necessary new spending bill before the financial year ends at midnight today on the final day of the 3rd Quarter. There is currently a political stalemate between the current government, the Democrats and the opposition the Republicans. It is hoped that a deal can be agreed as like in April 2011, following an 11th hour budget deal a government shutdown was avoided.
President Obama has repeatedly stated that he will not compromise over the main legislative achievement of his first term; Obamacare. The division between the two political parties has left Washington crippled with legislation rejected or watered down before it is passed.
What happens if there is no agreement?
If the government is unable to pass a new spending bill to increase the current borrowing limit of the government, then non-essential federal services would be immediately stopped and employees given unpaid leave.
Non-essential government functions would be stopped, as there wouldn’t be funds to pay the employees or overheads. The US Department of Defence released documentation on Friday the 27th September details on the "Government Shutdown, What You Need to Know”.
The shutdown would happen until the stalemate is broken and legislation to increase the US government’s borrowing limit is agreed. If an agreement isn’t agreed to increase the debt limit, then the US would default on its debt.
It is a waiting game to find out if an agreement can be met and legislation passed to avoid a government shutdown, overnight Asian equities feel as investors are concerned over a shutdown.
US Non-Farm Payrolls (Friday 4th October)
The US Labor Department has also said that it would not release the pivotal employment report (Non-Farm Payrolls) if there is a government shutdown according to CNBC.