US Senate’s stalemate is over... until next month
By Liam Sheasby, News Editor
23 Jan 2018
The US Senate in session
The US Government has just ended three days of federal shutdown after the Senate failed to pass funding plans. Hundreds of thousands of federal workers were home on unpaid leave while the US Senate attempted to break the deadlock, leaving only essential staff in work.
The Democrats were refusing to pass a funding bill due to its plans for immigration reform, which would see over 700,000 undocumented child immigrants – many of whom are now adults – forced out of the United States.
The governing Republican Party said it will not negotiate about the immigration issue until the bill is passed, with the White House even going as far as to blame the Democrats via voice message on one of their comment hotlines. The Democrats have since conceded, having been promised a full debate on the issue of immigration at a later date.
The US Senate met to vote at the end of last week but were met with stalemate: 50 yes votes to 49 no. There are 100 members in the Senate; 5 Democrats and 45 Republicans voted yes, 5 Republicans, 2 Independents, and 42 Democrats voted no, with Senator John McCain absent on medical grounds. For a motion to pass a bill must receive 60 votes in favour of it.
Midnight on Friday was the deadline for the spending bill, though an emergency session met on Sunday to try and break the deadlock. The bill passing will tide the US Government over until the middle of next month, when the Senate meets to do this all over again and vote for the longer term financial plans for the rest of 2018.
The US Capitol Building in Washington D.C.
The last shutdown came five years ago, during the Obama administration. The Republicans opposed President Obama’s Affordable Care Act propositions, putting the government out of action for 16 days while negotiations took place.
At the time, the Office of Management and Budget (OMB) in White House said $2bn was lost in productivity and the shutdown had had “significant negative effects on the economy” and the Financial Times reports that the S&P 500 suffered significantly in 2013 but this time round it was business as usual, thanks to the recent tax bill having passed and providing companies and investors alike with a sense of confidence that the playing field is well-established.
At the 9pm GMT close of the exchange the S&P 500 set a 10th record closing high for 2018. The pan-European STOXX 600 index was flat. Germany's DAX was down 0.1 percent, France's CAC-40 was down 0.2 percent and the UK's FTSE 100 was unchanged.
Elsewhere, the US Treasury’s yield hit its highest point since September 2014. Brent crude dropped below $69 dollars a barrel, and the gold price jumped up with the dip in the dollar value and dropped back down with the greenback’s value recovering. This is of stark contrast to the fears that CNBC reported last Friday in the run-up to the deadline.
The expectation was that consensus will be reached in a matter of days, and it has been. Investors were holding off abandoning the US Dollar or the booming stock market in favour of gold bullion. Talks didn't fail this time but next month is a much bigger vote. Should talks fail to progress again then the United States government would be at risk of serious economic damage, something that would greatly hurt the value of the dollar and see another boost in gold prices.