Having started in a typically fierce debate over whether the government had the funds to provide healthcare free at the point of use for millions of Americans has spiralled out of control, resulting in the shutdown of government services that has yet to end. It began after refusal from Republicans in both the House of Representatives and the Senate to ratify a budget plan from the Democrats.

Following this unusual yet potentially catastrophic move, there have been talks held to try and end the shutdown. Sadly for President Barack Obama, it seems that the Republicans are refusing to budge. Despite that, it seems that those on the Republican side are willing to talk, despite their vehement opposition to Obamacare.

“All we’re asking for here is a discussion and fairness for the American people under Obamacare”, said Republican House leader John Boehner to reporters. Boehner and Senate leader Mitch McConnell were among the leading figures in what caused the shutdown in the first place.

America on hold?

It’s estimated that the shutdown has forced around 700,000 government employees to take unpaid leave, while vital services including schools, welfare offices and even health centres are being forced to close until further notice. The economic impact of the shutdown could be just as dramatic as the human one, especially when the government debt ceiling comes into play.

“There’s a much bigger issue to address in around 17 days’ time – the raising of the US debt ceiling. That’s when the stop-gap measures agreed late last year are set to run their course and the $16.7 trillion borrowing limit will be exhausted”, said Joshua Raymond, chief marketing strategist at – group cityindex.co.uk.

“Both parties have had one eye on the debt ceiling talks all along. If they were to show any sign of concession now, that would weaken their position significantly with the debt ceiling negotiations.

“There is the possibility that Obama would use the 14th Amendment to raise the debt ceiling himself without approval from Congress but this potential remains open for debate on whether the 14th gives Obama the power to do so”, he added.

Driving towards default

As part of any future negotiations to try and end the shutdown, a new budget plan will have to be drawn up. Mr Obama has claimed he is willing to listen to try and restore some sort of normality, but time may be running out. The prospect of the US actually defaulting on its debt might have seemed unthinkable, but as the shutdown continues, the chances of it happening grow on a daily basis.

Mr Raymond added: “If the US fails to raise the debt ceiling or pass temporary terms that allow the US government to continue to borrowing, the US may be forced into a default scenario which would likely have serious consequences for both market confidence and the US credit rating.

“Cast your minds back to August 2011 when a similar scenario played out and the S&P cut their top notch rating for the US. This situation remains fresh in the memory of investors.

“So whilst the partial US government shutdown is concerning, investors need to watch the situation carefully for clues as to how debt ceiling negotiations will progress”, he concluded.

Update

Thousands of workers hit by the US shutdown returned to their jobs on Thursday October 17th, after President Barack Obama signed a law to extend the country’s debt limit. Funding has been approved for departments until 15 January.