The Republicans blocked a formal vote in the US Senate on Monday evening (local time) on a proposal that was intended to secure government funding beyond the end of the budget year this Thursday. The new financial year starts on October 1st, this Friday.
If no budget regulation has been decided by then, parts of the government will “shut down”. This means that some state employees would have to be given compulsory leave or work temporarily without pay. Depending on how long such a situation lasts, certain government services could be restricted or payments delayed. Such “shutdowns” by parts of the government occur more often in the USA. However, the administration of US President Joe Biden is determined to avoid this.
The House of Representatives passed the government’s temporary funding scheme last week with the vote of the Democrats. In the Senate, however, the Republicans resisted. They complained that the bill also provides for the debt ceiling to be suspended for the time being – which they reject.
According to Treasury Secretary Janet Yellen, however, if Congress does not raise the debt ceiling, the US government is at risk of default in the coming month. It is not possible to give an exact date, but the government will run out of money “during the month of October”, Yellen warned in early September. If the government fails to service its debt in October, the US economy and financial markets around the world face “irreparable damage.”
