Brawl in U.S. Congress -- Should the World Care?

Budget Battle
J. Scott Applewhite/AP
By Dhara Ranasinghe

U.S. lawmakers are at it again -- bickering over federal spending. For global markets the battle is important but not as significant as the impending battle over the U.S. debt ceiling, analysts say.

Budget spending must be agreed by Congress before Oct. 1 -- next Tuesday -- to prevent a government shutdown which could involve federal employees facing unpaid temporary leave and a possible delay in the payment of military personnel. Meanwhile, the debt ceiling must be extended later in October so that the U.S. Treasury can continue to borrow money and honor its sovereign debt obligations.

Most analysts expect a deal on the budget to be reached, even if it is at the last minute, since lawmakers are unlikely to want to risk any fallout at the 2014 congressional elections from allowing the government to shut down.

"I think markets will react in a sensible fashion over the next few days recognizing that we'll get through this [federal budget debate]," Harold Ford Jr., a managing director at Morgan Stanley and former U.S. congressman said.

"The real question is if we reach the same conversation around the debt ceiling. America defaulting [would have] a greater impact than the short-term impact on markets from the [budget] conversation we're having right now," Ford told CNBC on Wednesday when asked whether a government shutdown was a realistic prospect.

The Treasury has said the U.S. debt limit of $16.7 trillion will be hit in mid-October, with Treasury Secretary Jack Lew saying there is no plan in place to pay all of the government's bills once that threshold has been hit.

"The subdued tone to the markets right now is probably because of the debt ceiling, but I don't think we'll get such severe downward pressure that we got in 2011 with the downgrades to the U.S. credit rating," Geoff Lewis, global market strategist, at JPMorgan Asset Management told CNBC Asia's "Cash Flow" on Thursday.

"At the moment, it is all theatrics. I think the Republicans realize that if they disrupt government for no good reason, it could come back to haunt them in the next mid-term elections," he added.

On Friday, House Republicans passed a resolution that would fund the government until mid-December but not "Obamacare" -- President Barack Obama's health care reform law.

"In the near term, the debt ceiling debate and the continuing [budget] debate is going to cast a cloud over markets and in this environment it is safe havens such as the yen and the Swiss franc that do okay," said Nick Verdi, director of foreign exchange strategy for Asia-Pacific ex-Japan at Barclays.

According to Chris Weston, chief market strategist at trading firm IG, there's one reason why investors should worry about a potential U.S. government shutdown.

"If we do see a shutdown, then subsequently government produced data will be held back from release, and thus we won't get the Oct. 4 non-farm payrolls, which is so important to the taper jigsaw; clarity and uncertainty would get that little bit hazier," Weston said in a note.

The Federal Reserve last week took markets by surprise by not delivering a widely anticipated scaling back of its asset purchase program, leaving markets speculating once more about just when Fed tapering will begin.

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September 26 2013 at 3:35 PM Report abuse rate up rate down Reply

Everone needs and should have affordable med coverage. Is Obama care the answer? You have to wounder? If the people in congress don't want it for themself or their family. they EXEMPT. themselfs .Why? I think they are selling us snake oil.

September 26 2013 at 2:51 PM Report abuse +1 rate up rate down Reply

Boehner himself has admitted that catering to extreme conservatives will only hurt the GOP agenda. . . hopefully he will have the guts to lead the House into a compromise on the budget, and leave in the Health care funding. I've always been a Republican, but I see way too many uninsured people dragging down the system with emergency room visits and unpaid med bills. I may have to switch parties if this keeps up.

September 26 2013 at 11:50 AM Report abuse rate up rate down Reply
1 reply to Diana's comment

You r astute. Obama care is REPUBLICAN! Baggers who fear it are stupid - it's a Repub/Med-Biz PROFIT Bonanza!

All sorts of 'private investors' will form 'ancillary Bizes' to help 'administer Obamacare' - these ancillaries will make beau-coup PROFITS (the healthcare workers will be the serfs 'oiling the OCARE machine'!)

I can't be the ONLY ONE who grasps the irony of REPUBS fighting against OCARE?? So stupid! OCARE is a CAPITALIST's wet dream! Obama has pals/investors in Wall Street & he's gotta keep 'em HAPPY!

GO 1%! GO 1%! GO 1%!

GO ELSEWHERE 1%, YOU EXPLOITATIVE, PREDATORY mo.f.os.....Americans want you to LEAVE!

Hey 1%, take your war mongering & serf-trading with you! Go colonize the mid east - Obama will help you! 1%ers, think of the riches you can exploit in the mid east! GO 1% - get the EFF out of our Nation, we don't want u dirty bad.tards!

September 28 2013 at 2:04 AM Report abuse rate up rate down Reply

With we have in the "White House" this was bound to happen sooner or later

September 26 2013 at 8:41 AM Report abuse -3 rate up rate down Reply

I see Biden wants to sign your gun laws over to the U.N.?????
People,,,U.N. is useless.....This body of men want to control the world.....The U.N. has no business changing our body of laws set forth by our forefathers.
Democrates,,,you have gone way to far.!!!

September 26 2013 at 8:31 AM Report abuse -4 rate up rate down Reply
1 reply to pdbliz's comment

The UN loves our money but hates America.....just like the left.

September 26 2013 at 9:13 AM Report abuse -1 rate up rate down Reply

First,,,,,,There will never be a 100% Government Shut Down.....
Elderly and Welfare will get there checks.............Our Beloved President Obama HA!!
Will determine what parts of the government will be shut down.....I am sure he would shut down the departments that will hurt the country worse....
Make the Republicans look worse than they already do...
And,,let me ask,,,if you maxed out your credit card,,,,,,,would not you cut spending at home.????? THIS COUNTRY IS HEADED OFF THE CLIFF,,,,,,,,BORROWING OR PRINTING USELESS MONEY.!!!! I am talking both parties.!!!!!

September 26 2013 at 8:28 AM Report abuse -4 rate up rate down Reply
1 reply to pdbliz's comment


September 26 2013 at 8:42 AM Report abuse -5 rate up rate down Reply

Same ole song............Congress is full of idiots and our President is inept. Let the country default so we can take a pass on Chinese debt and move foward in prosperity.

September 26 2013 at 8:26 AM Report abuse +1 rate up rate down Reply
1 reply to Neville's comment

Why woukd we default on our debt? Quit listening to the big government politicians. Don't fear the shutdown.

September 26 2013 at 9:15 AM Report abuse rate up rate down Reply

If shutting down the government includes grounding Air Force 1 and locking our Representatives and Senators out of the Capitol building I'm all for it.

September 26 2013 at 8:24 AM Report abuse +1 rate up rate down Reply

Sebnd those idiots to africa they are a total waste to society

September 26 2013 at 8:02 AM Report abuse +2 rate up rate down Reply

SOS - Same Ole S _ _ t over & over again.

September 26 2013 at 7:32 AM Report abuse +1 rate up rate down Reply