US shutdown and debt ceiling deal what does the agreement mean World news

US shutdown and debt ceiling deal: what does the agreement mean?

John Boehner: hollow victory? Photograph: Win McNamee/Getty Images

An eleventh-hour agreement has been forged in Washington to avert a budget and debt default catastrophe. What’s going on?

After two weeks in which the federal government has been paralysed and the US economy brought to the brink of defaulting on its debts, a deal was done on Wednesday. Senate majority leader Harry Reid and minority leader Mitch McConnell announced it in the Senate, and a bill later passed both house of Congress. It was signed into law early on Thursday.

The federal government is reopening, employees are coming back to their offices and the US Treasury will be able to borrow the money it needs to pay its bills.

How did this come about?

In their determination to hobble the Affordable Care Act, Republicans in the House of Representatives, egged on by hardliners in the Senate such as Ted Cruz of Texas, refused to pass a budget resolution that would have authorised the funding of the federal government unless Democrats gave concessions over Obama’s healthcare law.

The White House and Senate Democrats held firm, calculating (correctly, as it turned out) that Republicans would be blamed for the government shutdown, and would – in the end – balk at allowing the US to default.

In the last week, cracks appeared in the Republican position and talks began to take place, particularly between moderate Republicans in the Senate and their Democratic counterparts.

It’s been a bumpy process.

Cruz faces the media after his 21-hour marathon spech atacking Obamacare Photograph: Jason Reed/Reuters

So where did we end up?

Reid and McConnell finally announced an agreement on Wednesday. It would have been announced on Tuesday, but the Republican speaker of the House, John Boehner, intervened, and said he wanted to pass his own bill that would carry the support of conservatives.

What happened to that?

It fell apart. Boehner, in the end, could not persuade the conservative elements of his party to back his proposals. It didn’t help when conservative advocacy groups, including the powerful Heritage Action, announced they would withdraw lucrative support for Republican candidates who backed the deal. The votes melted away and Boehner was left holding a very sick baby. After a wasted day, Reid and McConnell restarted their Senate initiative.

Crisis averted.

Not quite. First of all, this bill has to be passed. It’ll easily get the votes in the Senate, and it will also probably pass the House, but, embarrassingly for Boehner, he will need to rely on the minority Democrats to reach the 217 votes he needs – plus a couple dozen Republicans. Then there is the fact the deal doesn’t quite avert the crisis.

Federal workers demonstrate for an end to the US government shutdown, at the west front of the US Capitol. Photograph: Jonathan Ernst/Reuters

The short-term threat of a US government default is off the table for now. But the metaphorical can, which has been kicked down many rhetorical roads, is rolling again. Under the deal, the debt ceiling raise will only last until 7 February next year. The government will reopen, but will only be funded through until 15 January next year – so we could see a repeat of all of this in three months.

Don’t tell me we’ve got to go through all this again.

Well, possibly. But the deal also includes an agreement to appoint members to a bipartisan group of members of Congress to negotiate future spending levels. The hope is they will come to a consensus by early December, so theoretically they will hammer out their differences without the threat of economic disaster hanging over everyone’s head.

Because that’s always worked so well in the past.

Cynic. There is another important provision in the proposed legislation. It allows the US Treasury to use so-called “emergency measures” to pay its bills beyond February 7 – effectively meaning the guillotine would not fall for some weeks or months after that date.

Reassuring. Anything we need to know about the bill?

Two more things. First, they’re going to provide back pay to all of those furloughed government workers who have been suspended from work for more than two weeks. They will appreciate that, obviously.

Second, the legislation includes a provision to make sure that individuals taking advantage of subsidies under Obamacare do not lie about how much money they’re earning. It is a small, anti-fraud provision, to make sure the government isn’t swindled.

Didn’t Obama say he wouldn’t be held to ransom over Obamacare?

He did say that. But as White House spokesman Jay Carney pointed out at the briefing on Wednesday, it’s not a ransom when everyone agrees with it. Democrats are happy to live with it because the clause falls way, way, short of the full defunding of Obamacare that Republicans demanded when they first embarked on this standoff.

Think of it like a sprig of parsley garnish to make Republicans swallow a meal they really don’t want to eat.

White House press secretary Jay Carney speaks during his daily briefing on 16 October. Photograph: Mark Wilson/Getty Images

Anything else in the bill?

No. But don’t take our word for it. Read it for yourself.

I don’t need to. I have as much confidence in your word as I have for the full faith and credit of the United States of America .

Maybe you should read it.

Later. Where does this leave the Republican party?

In a bad place. They’ve been hammered in the polls. They opted for an extreme course of action, taking the country to the brink of economic disaster but emerging with virtually nothing to show for it. They were divided beforehand. Now it’s a whole lot worse.

Compare Louisiana Republican Charles Boustany, who said in an interview..

There are members with a different agenda. And I’m not sure they’re Republicans and I’m not sure they’re conservative.

. with Kansas Repulbican Tim Huelskamp, a member of Tea Party congressional caucus, who told me:

People back at home realise not all Republicans are conservatives. And some Republicans are anti-conservative.

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