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Prolonged US shutdown could hit SA

Economist says a prolonged shutdown will damage both the SA and the world economy.

FILE: US President Barack Obama delivers a speech on 21 September 2013 at the Washington Convention Center in Washington, DC. Picture: Paul J. Richards/AFP

WASHINGTON/JOHANNESBURG - Up to one million federal workers were thrown temporarily out of work on Tuesday as the United States (US) government partially shut down for the first time in 17 years in a standoff between President Barack Obama and congressional Republicans over healthcare reforms.

The stalemate closed museums, national parks and slowed everything from trade negotiations to medical research, while sparking new questions about the ability of a deeply divided Congress to perform its most basic functions.

More than 70 percent of the civilians working for US spy agencies have been deemed non-essential employees and now face temporary layoffs. The CIA and 15 other agencies as well as NASA and the iconic Pentagon will be locked up.

It's estimated 800,000 government employees will be temporarily laid-off during the shutdown, which is also expected to have a global impact.

Economist Mike Schussler says South Africa could be affected if it lasts more than two days.

"The American shutdown will cost non-essential staff in government a combined $300 million a day. The longer it carries on, the more the damage to the economy. It will obviously then damage the world economy and the South African economy."

However, the standoff did not prevent the Obama administration from rolling out enrolment in health insurance marketplaces, the centre piece of the most ambitious US social programme in five decades.

Republicans in the House of Representatives wanted to block Obama's signature Affordable Care Act by tying continued government funding to measures that would undermine it. But the Democrat-controlled Senate repeatedly rejected those efforts.

In Washington, museums were closed to tourists and police erected barriers around landmarks like the Lincoln Memorial. The National Zoo shut off a popular "panda cam" that allowed visitors to view its newborn panda cub online.

If Congress can agree to a new funding bill soon, the shutdown would last days rather than weeks, with relatively little impact on the world's largest economy.

But the standoff continued on Capitol Hill as the Democrat-controlled Senate formally rejected an offer by House Republicans to break the logjam.

"This shutdown was completely preventable. It should not have happened," Obama wrote in a letter to government employees.

Whether the shutdown represents another bump in the road for a Congress increasingly plagued by dysfunction or is a sign of a more alarming breakdown in the political process could be determined by the reaction among voters and on Wall Street.

The market appeared to be taking the closure in stride for now with US stocks rising modestly, but a week-long shutdown would slow US economic growth by about 0.3 percentage points, according to Goldman Sachs.

A longer disruption could weigh on the economy more heavily as workers on unpaid leave scale back personal spending.

After missing the Monday midnight deadline to avert the shutdown, Republicans and Democrats in the House continued a bitter blame game, each side shifting responsibility to the other in efforts to redirect a possible public backlash.

While some government offices and national parks were shuttered, spending for essential functions related to national security and public safety continued, including pay for US military troops.

Though the impact was likely to be most apparent in the Washington region it will be felt across the country as the federal government maintains offices in every major city and parks and other facilities are spread across all 50 states.

Republican Senator John McCain, who has opposed his party's efforts to link government spending to Obamacare, said his constituents were angry about the shutdown as landmarks in his home state of Arizona were closed to the public.

People that had planned for months to go to the Grand Canyon will be upset to find it closed, he told reporters.

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