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United States

Shutdown shut down: US breathes sigh of relief

As expected it went down to the wire: US Republicans and Democrats reached a last-minute compromise to prevent default and raise the debt ceiling. But trust in the country has been eroded.

John Boehner, Speaker of the House of Representatives, came across as a fair loser: "We fought a good fight, we just didn't win," the Republican said. Harry Reid, the Democratic Majority Leader in the Senate, sounded more celebratory, calling the agreement a victory for democracy and saying that the world's eyes were on the US. "Today they will also see Congress reach a historic, bipartisan agreement to reopen the government and avert a default on the nation's bills," he said.

Winners and losers? "There's no winner on this, there's just a lot of losers," Mark Goldwein, a non-partisan economist from the NGO Committee for a Responsible Federal Budget, said. "Thank goodness we found a way to avoid default and reopen the government. It's certainly going to improve economic growth."

 U.S. House Speaker John Boehner (R-OH) (C) addresses reporters at the U.S. Capitol in Washington, October 10, 2013. (Photo: REUTERS/Jonathan Ernst)

John Boehner- loser of the shutdown?

Back to work

The congressional compromise would raise the debt ceiling so that the US remains liquid at least until February 7, 2014. The agreement would also fund federal agencies until January 15, 2014. Furloughed employees could return to work Thursday morning already, Boehner announced.

After reaching this crucial compromise, further steps will have to be taken. A bipartisan comission will work on suggestions to reduce debt and will present results in mid-December. After all, there are still many longterm and shortterm problems that need solving, Goldwein said. "What we have is a set of health and retirement programs that grow faster than our tax revenue is keeping up, particularly our Social Security and Medicare programs," he explained. "At some point we either have to slow the growth of those programs, we have to raise more tax revenue or we have to do some combination."

A nation-wide sigh of relief

Even if it's just a temporary solution - the compromise prompted huge relief in the US. On Wall Street, New York financiers broke into standing ovations. Everyone talked about the "showdown to the shutdown" of the government. "I am finally able to fill my beds again," said a Washington hotel owner, who mostly rents to lobbyists and government guests. Over the last few weeks, he hardly had any business, he said.

One prevailing opinion among political observers Wednesday night was that it should have never come this far. The weeks of insecurity about a possible default deeply shook people's trust in the US economy and the value of the dollar as a world currency, Michael Werz said. "If something like this happens once, it can be forgiven," the researcher at the think tank Center for American Progress told DW. "But this was the second time in the last 24 months that Republican hardliners got us into a situation like this. It's slowly becoming a model and of course that shakes the trust in the US as a political and economic world leader."

Dollar bills in the air. (Photo: ullstein bild - CARO/Hoffmann)

The US spends more money than it earns

Billions of dollars of costs

The two-week shutdown not only cost the US a lot of trust, but also roughly $24 billion, economists estimate. It's unclear how big the financial damage will really be - especially considering that the compromise reached so painstakingly by the two parties is only temporary. The next budget fight already looms on the horizon when the stop-gap measures expire early next year.

But maybe politicians in Washington have learned something from this shutdown, Werz said. "If you followed the Senate debate, you could see that everyone was indeed shocked about how close we got to the brink," Werz believes. "Both allies and political opponents from all over the world told the US government that this was an irresponsible way to govern one's country. And I think they got through."

On the other hand, the researcher said, there were still many political unknowns. The vote to raise the debt ceiling without changes to Obamacare was a tough defeat for many right-leaning Republicans in Congress that they now have to deal with, Werz said.

'Humiliated and politically weakened'

The populist Tea Party movement was at the forefront of demanding significant changes to Barack Obama's healthcare reform. The extremist Republicans wanted to use the fight about the budget and the debt ceiling to cut down the president's prestige project. The core of the group was even willing to let the country go to default in their crusade against Obamacare, sources in Washington said. Ultraconservative Senator Ted Cruz from Texas said he was disappointed by the Representatives' vote and said that the Washington establishment had won again.

Sen. Ted Cruz (R-TX) answers questions from the media after meeting with Republican senators regarding a bipartisan solution for the pending budget and debt limit impasse at the U.S. Capitol October 16, 2013 in Washington, DC. (Photo: Andrew Burton/Getty Images)

Tea-Party Senator Ted Cruz is unhappy with the compromise

Observers say that Republicans will have much to work on in their own party over the coming weeks. "Their conservative speaker, Boehner, was repeatedly humiliated and politically weakened by a small, extreme faction of his own party in the span of a few weeks," Werz said. "It's going to be interesting to see how both groups - the conservative and the moderate Republicans - deal with each other inside the Grand Old Party."

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