US govt remains shut down as debt default looms

As the US government shutdown enters its second week there were alarming signs today that the world's largest economy was headed for an unprecedented debt default and the American political deadlock on the budget could have potentially catastrophic global consequences.

House of Representatives Speaker John Boehner said there will be no debt limit increase, and no end to the partial shutdown, unless President Barack Obama and Senate Democrats negotiate with House Republicans on the contentious healthcare programme, popularly known as 'Obamacare'.

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A defiant Boehner insisted that Obama must negotiate if he wants to end the shutdown and avert a default that could trigger a financial crisis and recession worse than 2008 when the country plunged into the worst recession since the Great Depression of the 1930s.

"The votes are not in the House to pass a clean debt limit, and the president is risking default by not having a conversation with us," Boehner said.

Treasury Secretary Jack Lew warned that the budget brinkmanship was "playing with fire" and implored Congress to pass legislation to re-open the government and increase the nation's $16.7 trillion debt limit.

In a series of television appearances, Lew warned that on October 17, he will exhaust the bookkeeping manoeuvres he has been using to keep borrowing.

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"I'm telling you that on the 17th, we run out of the ability to borrow, and Congress is playing with fire," Lew said.

The shutdown has left federal employees on unpaid leave and closed national parks, tourist sites, official websites, office buildings, and more establishments since last Tuesday.

Yesterday, most of the 400,000 Pentagon staff were ordered to return to work by Defence Secretary Chuck Hagel invoking the Pay Our Military Act.

Congress must act by October 17 in order to avoid a debt default by the US government.

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The government will run out of cash on that day for the first time in US history unless its debt ceiling is raised.

Republicans who control the House of Representatives have refused to approve the budget, saying they would only do so if the healthcare programme was delayed or stripped of funding.

Obama and the Democrats have refused, noting the law was passed in 2010, subsequently approved by the Supreme Court, and was a central issue in the 2012 election which Obama won.