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U.S. Government Shuts Down; U.S. Debt Ceiling

Aired October 1, 2013 - 01:00   ET



REP. NANCY PELOSI (D), MINORITY LEADER: It's brutal. It's brutal.


NATALIE ALLEN, CNN ANCHOR: Republicans and Democrats took the battle to the tipping point. Neither side willing to budge.


REP. JOHN BOEHNER (R), HOUSE SPEAKER: This law is not ready for prime time.


ALLEN: There you have it. I'm Natalie Allen.


The battle over the U.S. president's signature health care law has just forced a partial shutdown of the federal government. The deadline came and went an hour ago after neither House Republicans nor Senate Democrats backed down.

The Senate has repeatedly rejected House efforts to use a stopgap spending bill to derail Obamacare.

ALLEN: Now it means many government offices will close and furloughs begin today for 800,000 federal workers, even as a key part of Obamacare goes into effect today.

VAUSE: And all of this is fueling a much bigger concern about what sort of battle to expect when it comes to raising the nation's debt ceiling just a few weeks from now.

ALLEN: President Obama has signed a bill ensuring on-time pay for active duty military members. He also issued a video statement a short while ago explaining what the shutdown will mean for them.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I know the days ahead could mean more uncertainty, including possible furloughs. And I know this comes on top of the furloughs that many of you already endured this summer. You and your families deserve better than the dysfunction we're seeing in Congress. Your talents and dedication help keep our military the best in the world. That's why I'll keep working to get Congress to reopen our government and get you back to work as soon as possible.

Finally, I know this shutdown occurs against the background of broader changes. The war in Iraq is over. The war in Afghanistan will end next year. After more than a decade of unprecedented operations, we're moving off a war footing. Yes, our military will be leaner. And as a nation we face difficult budget choices going forward.


VAUSE: Now right now the House is still in session. All of this is still going on, even though it's just after 1:00 a.m. in Washington. So for the very latest, Joe Johns joins us now live from Washington.

Joe, government shuts down. What happens now?

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Well, in the short term, John, right now the House of Representatives is just wrapping up that vote on the House floor that was a vote on a measure to seek to go to conference or to negotiate with the Senate over these matters.

After that, we're told, the House Speaker John Boehner is expected to give a news conference some time shortly afterwards. And then it will probably calm down here for the next few hours. The government has shut down. The Senate will probably come back into session tomorrow, we're told, and they will say, no, we don't want to go to conference.

The government most importantly has been in the process of letting hundreds of thousands of employees who are affected by this impasse know whether they're supposed to report to work today. The law divides the government employees into categories. They're now called accepted and non-accepted. But essentially what that means is some are considered essential, some are considered nonessential.

The nonessential ones will not come to work. The essential ones will come to work. And the elected leaders of the government will try to find a way out of this impasse. It's going to require some negotiation, either a short-term fix or something otherwise -- John.

VAUSE: Joe, this was an extraordinary night in Congress. It's been an extraordinary few days. The last few hours, it was a bit like a game of hot potato. The bill going through the Senate, to the House. So how did we actually get to this point?

JOHNS: Well, it's because the House, the Senate, the White House, in simple terms could not agree on a spending proposal to keep the government operating. It's all about attempts to undermine President Obama's healthcare law, which is despised by, frankly, some conservatives and some Republicans.

This is occurring because they just can't agree on anything. The latest proposal from House Republicans essentially was to try to get some type of negotiation going. But as we all know, the Democratic leader of the Senate rejected that. And this is the kind of thing that has not happened in Washington, D.C. for 17 long years. The last time it happened was during the Clinton administration. And we went through weeks of back and forth until some type of agreement was reached -- John.

VAUSE: And, Joe, as you mentioned, we are waiting for that statement from the speaker of the House, John Boehner. This is a live image. We're expecting the speaker to walk out any moment and -- to make a final statement after what has been an incredibly long few hours there, I guess, for everybody in Congress. And as soon as that happens, we'll bring it to you live here on CNN.

But despite all of the rancor, Joe, there was actually agreement on at least one point.

JOHNS: That's true, John. That one issue was about agreeing -- the member of the Armed Forces would be paid in the event of a government shutdown. Funding for their salaries for fiscal year 2014. The president issued a video statement about that. Listen.


OBAMA: Those of you in uniform will remain on your normal duty status. The threats to our national security have not changed and we need you to be ready for any contingency. Ongoing military operations, like our efforts in Afghanistan, will continue. If you're serving in harm's way, we're going to make sure you have what you need to succeed in your missions.


JOHNS: That bill the president is referring to was passed by both the House and Senate and signed by Mr. Obama this evening -- John.

VAUSE: Yes. It won't just be the military getting paid. Congressional pay not affected by the shutdown. Clearly members of Congress, essential as well.

Joe, thank you. Joe Johns there, late night duty in Washington.

ALLEN: Well, even though the government has shut down over Obamacare, as it's often called, the irony is today is the first day Americans can sign up for it.

So what exactly is the Affordable Healthcare Act? That's the official name. The Patient Protection and Affordable Care Act. Approved by Congress and signed into law by President Obama in 2010.

Supporters say it will provide affordable medical care to the 48 million Americans who currently lack health insurance. October 1st is the first day Americans who want to buy health insurance through Obamacare can do so. The law requires that every American have some form of health insurance by 2014. Anyone without coverage by next year, will be fined at least $95.

So looking at the political calculus here, who among Washington's power brokers stands to benefit from the government shutdown and who stands to lose?

John King shows us where the opinion polls are right now.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: It can get pretty confusing watching the political ping pong between the House and the Senate but there are some simple truths to the shutdown debate. And one of them is, a big majority of American people do not want a shutdown to happen.

Look at this, nearly 7 in 10 Americans say it would be a bad thing to shut the government down for a few days. Just 27 percent say that would be a good thing.

And on the defining question here, is it more important to shut down the government or continue the fight that some Republicans want over spending and the president's health care law? Well, look, 6 in 10 Americans say avoid the government shutdown rather than blocking the president's health care law.

But, but these are national numbers. And it's important to look at local politics in all this. Because it's 30 or so House Republicans, the most conservative House Republicans, driving this debate. A handful of the most conservative senators driving this debate. They think they're on safe ground back at home because among Tea Party supporters, 56 percent say it would be a good thing to shut down the government for a good day.

So those conservative say back home the people support them as they continue the confrontation over the president's health care plan.

A couple other key points. Who are the big players in this? Well, the president who would be a key player in cutting any kind of a deal enters this actually politically weakened. Fifty-three percent of Americans disapprove of how the president is handling his job as president. Only 44 percent approve.

Now some Republicans are worried he could use this controversy to his advantage and change those numbers. If you look at the president's numbers, among Democrats, he's in pretty good shape, 8 in 10 Democrats support him. But look at this, among independents, more than 60 percent disapprove of the president's job, and of course more than 80 percent of Republicans don't like the way the president is doing this.

The most important person at the moment, though, is the Republican House Speaker John Boehner. And here's an interesting number. Only one-third of Americans have a favorable opinion of the speaker. Nearly half unfavorable.

But this one is even more interesting. He's the most powerful Republican in the country, the most powerful Republican by far in Washington, yet only 54 percent of self-identified Republicans have a favorable opinion of John Boehner. That in part is because of those conservatives who don't trust him. They think he's too willing to make a deal.

Now as all this plays out, the maneuvering in the United States Congress, how about this for a number that you would have to describe as pathetic? Only 10 percent of the American people approve of the job their legislature, the United States Congress, is doing right now. Only 10 percent. And that's half of what it was just earlier, just a month ago, in September.

Ten percent of the American people approve of the job Congress is doing. And we know that nearly 7 in 10 do not want a shutdown.

VAUSE: And we're still waiting for that statement to come from the speaker of the House, John Boehner. There is a stakeout right now in the Capitol building. We know that the Senate has finished for the day. So we are expecting some kind of statement from Mr. Boehner. The Senate will be back in session in about eight hours, just over eight hours from now.

ALLEN: We will see what, if anything, what he says does to his approval rating. Yes.


A lot of people may be watching right now. Well, most Americans may not want a federal government shutdown, but the shutdown is now here.

VAUSE: So how did this actually happen? Straight ahead we'll look at some of the politicians who may be blamed.

And we'll see how global markets are reacting to what's just happened in Washington.


ALLEN: One hour and 12 minutes, the U.S. government has been shut down. So it is now a reality and the finger-pointing well under way. A group of Republican Congressmen who refused to compromise have been taking a lot of the heat.

Brian Todd now on who they are and what they want.


BRIAN TODD, CNN CORRESPONDENT (voice-over): By most accounts, House Speaker John Boehner didn't want it to get this far, didn't want to use the prospect of a government shutdown to push for defunding the president's health care law. But according to a recent report, a small corps of Republican representatives were the catalyst for the current showdown and forced Boehner's hand.

It started with a letter to Boehner in August from an obscure freshman Republican Congressman from North Carolina, Mark Meadows. The letter said, quote, "We urge you to affirmatively defund the implementation and enforcement of Obamacare in any relevant appropriations bill brought to the House, including any continuing appropriations bill."

Ryan Lizza, who reported this for the "New Yorker," says the idea gained serious momentum. RYAN LIZZA, COLUMNIST, THE NEW YORKER: Some of the conservative groups got behind his effort including Freedom Works and some conservative senators, Ted Cruz, Marco Rubio, Mike Lee.

TODD: Soon, Lizza says, the letter was signed by 80 Republican representatives but some influential conservatives slammed the strategy. Pundit and strategist Karl Rove wrote in "Wall Street Journal," "It was an ill-conceived tactic that would alienate independents." Columnist Charles Krauthammer called this group, the "suicide caucus." One of the letter's signers, Texas Republican Blake Farenthold, responded.

REP. BLAKE FARENTHOLD (R), TEXAS: Listen, we've got to use what few leverage points we have in a divided government and the continuing resolution is one of them. You know, we can't move anything unless we've got some leverage.

TODD: Farenthold says the vast majority of people in his district don't want Obamacare. But if he's one of only 80 Republicans who signed on to this strategy early on, why did Boehner go for it?

LIZZA: He's got 233 members. So -- and it takes right now 217 to get a majority in the House of Representatives. So if he loses just a few members, he doesn't have his majority. So 80, even though it's not even a majority of the Republicans, it's enough for him to have to listen to them or he can't pass legislation.

TODD (on camera): Other factors, Lizza says, Boehner doesn't have earmarks to offer like his predecessors as speaker. And outside conservative groups who raise money for those hard line congressmen in their districts have also siphoned power away from the speaker's office. We couldn't get a response specifically to that or to the criticism from other Republicans of this strategy from Boehner's office.

Brian Todd, CNN, Washington.


VAUSE: Let's talk a little more with "New Yorker" columnist Ryan Lizza. You just saw him in Brian Todd's report there. He is in Washington.

Ryan, good to speak with you.

LIZZA: Good to see you.

VAUSE: The suicide caucus, as they're known, as they've become known, 80 members?


VAUSE: I'm going to hold -- put it on hold because John Boehner is actually just making an appearance. Good timing.

BOEHNER: Made his position known very clearly. We believe that we should fund the government and we think there ought to be basic fairness for all Americans under Obamacare. Now the Senate has continued to reject our offers. But under the Constitution there's a way to resolve this process, and that is to go to conference and talk through your differences.

And I would hope that the Senate will accept our offer to go to conference and discuss this, so we can resolve this for the American people. Questions?

UNIDENTIFIED REPORTER: Mr. Boehner, Mr. Speaker, the stakes have really been raised in this now. And you have members in both parties who want to vote on a clean CR. You've said you would like the House to work its will. Will you permit a vote on a clean CR?

BOEHNER: We're hoping that the Senate will take our offer to go to conference and let us resolve our differences.

UNIDENTIFIED REPORTER: Speaker Boehner, tomorrow, later today, 800,000 federal workers will receive notices they're no longer needed on the job. You have -- what's your message to them and do you have a plan to restore back pay to them?

BOEHNER: The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare.

UNIDENTIFIED REPORTER: What do you say to those workers, sir?

VAUSE: That was, indeed, a very brief statement by John Boehner, cutting it very short when he was asked, what do you say to those 800,000 federal workers who have now been furloughed, just simply walking away.

Ryan Lizza is in Washington. Want to talk about the hard core, right- wing conservatives who are being blamed for all this. But I want to get your response right now to Boehner's comments there. He talked about taking this to conference.


VAUSE: How does that work? Is that a realistic issue -- alternative here?

LIZZA: Well, I mean, technically he's right. That is the way we resolve differences when the House and Senate disagree on something. What's so strange in this case is they brought this thing right up -- well, to the finish line. Let the funding mechanism for the government run out. And now he says he wants to go to conference.

Of course, the way the system is supposed to work is that conference was supposed to have been appointed months and months ago. And the position of the Republicans is they didn't want to go to conference.

So look, to me, you saw -- you saw -- he looked exhausted. And he looked like someone who did not want to be in the situation he's in right now. Remember, John Boehner publicly said he did not want this fight. He publicly said he did not want to use the threat of a government shutdown to extract the policy concession from Obama of trying to overturn the health care law. And it was, frankly, forced on him by several dozen members of the House of Representatives.

VAUSE: Yes. And let's talk about, you know, this is the suicide caucus, as they're being known because everyone thought they were on a suicide mission here. You've looked closely at this. You've written about this. And you've made the point that they live in a very different America in the sense that it's much whiter, it's older, and in those districts Obama lost in a landslide.

LIZZA: Yes, I mean, look, obviously Obama won by four points nationally. It was a pretty important re-election. And the story of that re-election is about an America that is becoming more diverse and less white. But if you look at the 80 members that signed on to that letter in that report that you had before, those 80 members won their districts by an average of 34 points. Barack Obama lost those districts by an average of 23 points. And those districts are about 75 percent white.

So our system is distorted. And look, there's some of this that goes on on the Democratic side, too. The Democratic side has -- has members who are far to the left and districts don't represent the country. What's unique now is how this faction has been able to influence national policy and literally set us on the course to a government shutdown against the wishes of most of the senior Republican strategists and even the speaker of the House.

And that is what is so historically unique about this. It's the power that they have been able to exercise.

VAUSE: But essentially it's -- it's a situation now where Boehner is not really running a Republican Party. He's sort of running a coalition.


VAUSE: And he's lost control.

LIZZA: He's lost control. He's a very weak speaker of the House. Weaker than any of the recent speakers. Nancy Pelosi was a very strong speaker. She could basically get anything she wanted passed because she ruled the Democrats with an iron hand and she didn't let her far left faction control her.

You know, as Brian Todd point out in that report, the speaker doesn't have the tools that the old speakers had. They don't have money, basically. They can't buy off their members with pork and earmark projects. And they can't buy them off with campaign cash anymore because a lot of that campaign cash is raised by outside groups or entrepreneurial politicians like Ted Cruz who have independent identities that are outside of the party structure.

And so I think that's the story of how we got to this government shutdown, is a -- not a tiny faction, but 80 members out of 233, pushing this tactic on John Boehner, who didn't want to do this. And as you saw in those brief comments he made, he did not look like a man who was happy to be in the situation he's in.


LIZZA: How does he get out of it? Well, I think he's got to show his team that, look, we're suffering because of this. The Republican brand is suffering because of this. And we need to move beyond it. We need to move beyond the government shutdown, which as all the polls shows, is going to be blamed on the Republicans.

VAUSE: And Ryan, as we're talking, the House of Representatives is actually still in session. They're on their feet. They're still talking. It is 21 minutes past 1:00 East Coast Time. These are live images coming to us from the floor of the House.

It's an extraordinary night, becoming an extraordinary morning. I'm just curious, how much does this crisis have to do with the past presidential election, which the Republicans lost?


VAUSE: And you have these ultraconservatives who believe that they lost that election because they had all these squishy moderates. And now looking forward to the next election, in 2016, they want a real hard core conservative as their nominee.

LIZZA: Well, that's what is very interesting about the re-election of Obama is. A lot of folks argued before that election that the way to sort of break the deadlock in Washington was for Obama to have a sort of decisive victory or for Romney to have a decisive victory. But either way you would sort of break this partisan debate and you would get a little bit -- you'd at least get a year of negotiation over some of the tougher issues before everyone returned to focusing on the campaigns.

And that has happened in previous presidential elections. The other side sort of accepts it and tries to -- tries to -- you know, tries to play the best hand they can, win some policy concessions but does negotiate.

What happened this time is different. As you pointed out, the Republicans decided that -- or many Republicans at least decided that their loss was due to a moderate candidate and that the thing they needed to do going forward was to move to the right. And this is -- you know, this is the problem with the Republican Party being -- having such a lock on the House of Representatives.

And that lock on the House of Representatives being due to these districts that are carved perfectly to ensure that they win in super majority elections.

VAUSE: Yes, some call that a gerrymander.

LIZZA: Exactly. They're gerrymandered. So, you know, it's rationale from their day-to-day point of view, right?

VAUSE: Yes. LIZZA: They get up every day, they're hearing from constituents who hate Obamacare. And as that one Congressman said before in that -- in Brian Todd's package, they think, I won my election. I was sent here to defeat Obamacare. I'm going to use every single tool at my disposal.

VAUSE: Right. Sorry just -- we're out of time. I want to get very quickly to the debt ceiling.


VAUSE: There is a very long list of demands which Republicans are laying out, it seems, unprecedented on many levels.


VAUSE: Are we setting the stage for an bigger crisis now just a couple of weeks away?

LIZZA: I think anyone who just assumes that Washington will work out these fiscal crisis as they have in the past two years and that we -- you know, it will all work out, you cannot be that optimistic anymore. You have to -- the percentage chances of default -- of a default are much higher after tonight.



VAUSE: OK, Ryan, sorry to interrupt. We really appreciate your insight. It's been great having you here. Thanks for joining us.

LIZZA: Thanks for having me.

VAUSE: Ryan Lizza there, a columnist with "The New Yorker" -- Natalie.

ALLEN: Much to think about with what has just happened. You're watching our live coverage, reaction to the shutdown of the U.S. government. And the stock market is something we're going to talk about now. A lot of people will be watching to see what happens in Hong Kong and Shanghai. They're closed today for the holiday.

But here's how other exchanges in the region are doing right now after this news. The Nikkei is up 0.44 percent, so is the S&P ASX 200, just barely and the Seoul Kospi up 0.04 percent on an early day so far in Asia.

Let's get more on the Asia markets, some reaction to the U.S. government shutdown. CNN's Maribel Aber joins us now from New York.

Maribel, thank you for joining us. And what will you be watching and what kind of indication is Asia as we press on as these markets open around the world?

MARIBEL ABER, CNN CORRESPONDENT: Wow, big day today, Natalie. And you know what, so far you just talked about the markets, world reaction is pretty quiet. Asian markets, again as you said, posting small gains in early trading.

Here's the thing, the dollar was little change so we were watching that. And also, let's break out and talk about Japan a little bit. Japan got a positive manufacturing confidence report. And that's what ended up boosting stocks. OK, Japan's prime minister reportedly just announced a sales tax increase from 5 percent to 8 percent. So he's going to unveil details about an economic stimulus package a little later on today.

And of course, that's really aimed at reducing Japan's debt burden. As you know, Natalie, Japan carries the world's biggest debt. And all this could have greater consequences for Asian markets. Do also want to point out here that we spoke to someone who said this actually is a very good indication that Japan is taking its debt seriously right now.

But not a lot of reaction other than that in Asia markets as far as the government shutdown. Again, as you said, Nikkei was up at last check.

In terms of the U.S., we're going to be watching for futures and seeing how that impacts -- how the government shutdown impacts that. But big, big, big day. We're watching all of it closely -- Natalie.

ALLEN: Right. And Maribel, aren't the U.S. markets, aren't they supposed to be affected the most?

ABER: We -- you know, we don't know. Sure. I mean, the markets are such a funny thing. The markets hate uncertainty, but right now we do have certainty. The government has shut down. But if we talk about where we were before, let's talk about a little bit of history, we were able to rebound pretty quickly. I think the question that investors and the markets are looking for right now is how long this shutdown will last. Will anything happen as we go through the night or will this be a longer period -- Natalie.

ALLEN: Right. If there is a correction, the size of it, of course, will be dependent on the length of the shutdown, or showdown. They both work, I guess, in this case.

Maribel, thanks so much.

Now over to John.

VAUSE: OK, Natalie.

And you're watching live coverage of the government shutdown. And this may just be the tip of the iceberg. Why the looming fight over raising the debt ceiling could be a whole lot worse for the global economy.


VAUSE: And welcome back to our continuing coverage of the U.S. government shutdown. It all began about an hour and a half ago when the clock struck midnight in Washington.

ALLEN: But another showdown between the White House and Congress -- yes, there's another one.

VAUSE: There is another one. Definitely.

ALLEN: It's looming later this month over what is known in the U.S. as the debt ceiling. And many are calling this government shutdown silly and dumb but they're calling any messing with the debt ceiling downright dangerous.

VAUSE: Economic Armageddon.

ALLEN: Right. So here's Tom Foreman taking a look at that part of the story.

TOM FOREMAN, CNN CORRESPONDENT: Take a look right over there. October 17th. That is the red letter date, according to the Treasury. That is the date upon which the government will have $30 billion to pay its debts. And that's a lot of money but not compared to the money we owe. About $60 billion on that day.

So what are they going to do? Same thing you do if you had this kind of problem in your House. They're going to look at everything they could spend money on and pick some priorities. For example, they might put money into Social Security because that's an important program a lot of people count on. Maybe some money into the interest on the debt to keep it from getting any worse.

How about some money into Medicare, and then maybe something into veterans and the military and perhaps some money into supplemental security income, and then there's the problem. The money's all gone and yet hundreds of thousands of federal workers are now being unpaid. All sorts of agencies are not being serviced. The FBI, the FAA and many others.

So what can they do?

Well, first of all, they can realize that revenue keeps coming in. And because a little bit comes in every few days, they could try to fund everybody to sort of subsistence level. Not really making them healthy but keeping them from closing down.

But that's not really the solution, is it? No. Everybody here seems to agree the real solution is to getting the debt ceiling solved so there's enough money to pay for everything fully. But that's a whole different fight. And until it's solved, that red letter date just keeps looming.

VAUSE: OK. That red letter day, mark your calendars, October 17th. That's the day when the government needs to raise its debt ceiling or it's going to default, essentially.

Let's bring in CNN's Lisa Desjardins who is in Washington with more on this. And Lisa, with the government shut down, it now seems that the threat of default, not raising the debt ceiling at the very least is now on the table.

LISA DESJARDINS, CNN CORRESPONDENT: Absolutely. In fact I just came from several news conferences with Republicans and Democrats over here. As the Democrats walked away from their news conference, obviously unhappy about the shutdown, I asked some of their leaders, what do you think this means for the debt ceiling? The second Democrat in the House, his name is Steny Hoyer, stopped and said, well, it's obviously not good.

And you think about this. The shutdown debate is something that generally was not expected to take this long. And as of a month ago, I think most people thought only the debt ceiling would have this kind of snag. The debt ceiling, most everyone here agrees, is a much bigger deal. And this is the time that Congress would usually start negotiating, trying to figure out how to deal with the debt ceiling.

But instead, Congress is backed up trying to figure out a partial government shutdown. So indeed, as that one leader told me, it really is not good news for the debt ceiling debate.

VAUSE: Yes, absolutely. Let's talk about the impacts here.


VAUSE: We also know that the House is actually finished for the day. They've called it a night at 1:32 in the morning there in Washington.


VAUSE: They're all heading home. No doubt they'll be back in the next couple of hours.

But, Lisa, you talked about the financial impacts when we look at the government shutdown. That's nothing compared to what will happen if the debt ceiling isn't raised.

DESJARDINS: No. You can sort of think of the two -- this is a rough metaphor, and it's 1:30 in the morning so forgive me for trying this, but, you know, if the government shutdown is sort of like a town that has a broken bridge, the debt ceiling is almost like a dam that has cracks in it behind that town. A much bigger deal that will have much far-reaching -- farther reaching consequences.

The debt ceiling will affect not only government workers but U.S. credit, potentially U.S. credit ratings and the U.S. doesn't even have to break the debt ceiling. Kind of go up to the limit in order to begin these credit rating problems. Just the problem of the U.S. Congress being unable to solve this, just the deadlock that Congress is experiencing. If this continues, that alone may be enough to bring the credit rating of the U.S. down.

Already the U.S. has seen a fallen credit rating from one credit company. There's two more out there. So right there that affects stocks, bonds, world markets, economies around the world, and certainly the economy of the United States, which is one of the more positive stories right now as the rest of the world knows. Even though the U.S. isn't growing so strongly, it has been growing. And that could be at risk depending on how Congress handles both of these fiscal crises.

VAUSE: Yes, it could be a completely, totally self-inflicted economic wound.


VAUSE: Lisa, thank you. Lisa Desjardins there in Washington.

DESJARDINS: You got it.

ALLEN: And she did well with that metaphor.

VAUSE: She did.

ALLEN: I think we get it. Yes.

A lot of Americans are worried. You know, a lot of Americans have fragile lives right now anyway due to the economy and a lot of people working for the government worried right now. We'll have more on the impact of the shutdown coming up.

VAUSE: Yes, up next, what will happen to the military, including the disabled, and the retired and those on active duty. Those details just ahead.

ALLEN: Also, how will this impasse between the White House and Congress impact America's image abroad? We'll talk with people about that.

Much more in our live coverage of the government shutdown coming up here on CNN.


VAUSE: And welcome back to CNN NEWSROOM. I'm John Vause.

ALLEN: And I'm Natalie Allen. This is live coverage of the U.S. government shutdown.

VAUSE: Both the House of Representatives and the Senate have gone home for the night, but the deadlock continues over a spending bill that has led to a partial shutdown of the government.

ALLEN: And it's all tied to Republican efforts to derail the Affordable Care Act known widely as Obamacare. And it is far from over.

Joe Johns joins us live from CNN Washington. And Joe, we just heard from John Boehner. Looking defeated a short while ago. Very quick in his comments. Now the House has gone home, so we're all wondering, what's the next step here? JOHNS: Well, he's certainly stuck between a rock and a hard place, I think. The speaker of the House can't possibly want a government shutdown to go on for very long. But the truth of the matter is, that he's stuck between a lot of people in the government who want functions to continue and a small faction within his own party, the Tea Partiers, who are very concerned about the deficit, who are very concerned about government spending, and they want the Republicans in the United States Congress to take a stand.

So how he negotiates this and allows for a spending bill to get the government running is anybody's guess right now -- Natalie.

VAUSE: Hey, Joe, just tell us. It seems that the president, President Obama, and the Democrats, are really taking a hard line here, especially when it compare it back to 2011 when many Democrats believed that the president caved.

So why is Obama taking such a tough line here when dealing with the Republicans?

JOHNS: Well, a lot of reasons. I think the first reason is polling. If you look very closely at the polling, it's pretty clear that the American public doesn't like the idea of using the issue of the president's signature health care bill as a reason to stop the functioning of the government. So he seems to have polls on his side. The second, obviously, is the fact that this health care bill is very important to this president and very important to the Democrats in general.

And I think the third part of it is the configuration of the government, John. The Democrats control the United States Senate. They control the White House. And Republicans control just the House of Representatives. So they feel that they have the advantage and they're going to try to use this and probably the last thing, and that's the talking point we've heard so many times, is the fact that down the road we have the issue of the debt ceiling to deal with. And they feel if they don't take a stand right now, it will be even tougher to try to get across that bridge once they get to it -- John.

VAUSE: OK, Joe, thank you. Joe Johns with us again live.

This has been such a nasty debate between the Republicans and the Democrats. There's been so much name calling. It really is different from what it was just two years ago.

ALLEN: Yes. John King just pointed out, the likability Americans have for their Congress is down to 10 percent.

VAUSE: And that's just family and friends at this point. I think. No one else is approving of the job they're doing.

Well, some U.S. government services will stay open despite the shutdown, including Air Traffic Control and airport security. So if you do have a flight in or out of the United States, you will not be affected by the shutdown. Also, U.S. embassies and consulates overseas will remain open. Most passport offices will also be in operation unless they are in a federal building that has been closed as a result of the shutdown. But government officials say passports and visas will be processed. And the mail will still get through. The U.S. Postal Service will stay on duty.

ALLEN: You'll get your bills.


Well, the U.S. government shutdown could delay paychecks for veterans and other military families.

Pentagon correspondent Barbara Starr reports on what else can go wrong.


BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): For 3.3 million disabled veterans, the budget mess in Washington is about to affect them in a big way.

OBAMA: Veterans, who've sacrificed for their country, will find their support centers unstaffed.

STARR: If the government shuts down and it stretches into late October, the Department of Veterans Affairs will run out of money. And that means disability and pension checks could stop for elderly and ill veterans. Advocates are outraged.

TOM TARANTINO, IRAQ AND AFGHANISTAN VETERANS OF AMERICA: It's what they need to pay rent, to pay food. It's not their total income but it is a significant part of it. And taking that out of the mix because the government can't get its act together is really dangerous for these men and women who need it the most.

STARR: Disability payments can reach $3,000 a month. For the nation's war wounded, it can be a financial life line.

Tom Tarantino is an Iraq war combat veteran.

TARANTINO: Member of Congress, members of the administration, any politician needs to understand that if you are holding veterans hostage for the sake of political gain or if you're trying to balance the budget on the backs of the men and women who have served and sacrificed for this country, you are going to pay a political price.

STARR: For America's 1.4 million troops still on duty and their families, the prospect of a shutdown has also brought worry about delayed paychecks, even though Congress has moved to ensure men and women in uniform, including those in Afghanistan, are paid on time. But Eileen Huck, a Navy wife, says there's still plenty of anxiety about what may happen.

EILEEN HUCH, WIFE OF U.S. NAVY CAPTAIN: Short term, you know, the commissaries where we do a lot of our shopping, will be shut down. And for those of us who get our health care or our children's health care at military facilities, it's possibly that that's going to be affected as well. Routine appointments are not going to be available.

STARR: Still, 400,000 civilian Defense Department personnel will be furloughed until Congress and the White House reach an agreement.

Barbara Starr, the Pentagon.


VAUSE: So how deeply the shutdown will affect America and the rest of the world, it depends on how long it goes on, but it is having an immediate impact. Some 800,000 government employees are being furloughed, they're not getting their paychecks. That could cost the U.S. economy $1 billion a week. Government contractors could go unpaid. The government will not issue any economic reports. And investors find those reports vital.

For U.S. visitors, visa applications will still be processed but visitors will find locked gates at national monuments, museums and national parks like Yosemite.

With the U.S. government shutdown and the looming debt ceiling crisis, the U.S. image abroad is taking a beating to say the least.

Joining us now via Skype from Istanbul is Martin Sorrell, the CEO of the marketing communications company, WPP.

Martin, good to have you here with us. There is a perception out there that the U.S. is ungovernable, that it's simply lurches from crisis to crisis. So how does this affect the image overseas?

MARTIN SORRELL, CEO, WPP: Well, it certainly doesn't help. Good morning, early morning, this is do-it-yourself television from Istanbul. But it certainly doesn't help. But we've seen this before a couple of years ago. We had a very similar situation. I don't think the impact of the shutdown is significant yet. The Asian markets actually have not yet been particularly depressed. Actually I think they're up in early trading this morning. We'll see how that pans out into Europe.

So no panic in the markets yet. But from an image point of view, you're right, it doesn't -- it doesn't look good. And those people running businesses really want to be left alone to get on running their businesses. We had the sequester impacting U.S. GDP growth in the first half of the year. Instead of being up 2 or 3 percent, it's been in the 1, 1.5 percent range. So I think -- I think people are troubled by it.

It's not good from an image point of view. The government does look in -- as though (INAUDIBLE), nowhere to go. But really the crucial issue is how long will it take politicians to sort out this crisis and come to an agreement and, of course, deal with the debt ceiling crisis that we have coming down the road as well.

VAUSE: And, Martin, though, Americans here, they have crisis fatigue. They've been through this. They've seen it. They've seen the standoffs. What about the rest of the world? Is there crisis fatigue when people look at the United States, said it's heard this so many times before?

SORRELL: No, I -- I'm bullish on the U.S. I'm bullish on the fast growing markets, the mint markets, Mexico, Indonesia, Nigeria, and where we are at the moment, Turkey. We have a board meeting coming up here next week. As I'm very bullish on those markets. But I'm also bullish on the U.S. Energy self-sufficiency, improvements in manufacturing techniques such as 3-D manufacturing means that America is going to grow.

I was talking to a -- to a fast-growing market investor, all this CAPEX will be in the United States, all in the energy sector in the next couple of years. So I would be bullish in the longer term. This, I hope s a short-term blip. But you're right in a sense I think the electorate and, indeed, business is really fed up with government arguing amongst themselves.

And really given that we've been in a sort of recessionary mode since Lehman, we've just celebrated -- if that's the right word -- five years after Lehman, that terrible weekend in September of 2008. And really we want to get away from that and out of it and see stronger economic growth.

So things like this really don't help image-wise and psychologically. And I think long-term prospects for America are good. They're not mediocre or poor. They're good. But this doesn't help certainly in the short term.

VAUSE: Absolutely. OK. Martin Sorrell there in Istanbul, Turkey, giving us a view from Europe about what they may be thinking about the United States' image right now. Not particularly good. Thanks, Martin.

SORRELL: Thank you.

ALLEN: A lot of countries all around in the world the past couple of years have been battling within themselves and their governments, people taking to the streets.


ALLEN: It will be interesting to see how Americans react as well. The U.S. government may be shut down.

VAUSE: Yes. But stock markets in Asia have actually been rising today. We'll try to explain why they are higher. That's coming up next.


VAUSE: And welcome back to our continuing coverage of the U.S. government shutdown. It's about five hours until dawn in Washington where about 800,000 federal workers will be getting out of bed but not going to work, not getting paid. Republicans in the House of Representatives and Democrats in the Senate did not come to an agreement on how to keep the government funded.

While we expect U.S. markets to react when they open, markets in Asia seem to be shrugging off the shutdown.

Let's take a look at the latest numbers. The Nikkei up by 0.5 percent. Australia down just a touch. And Seoul also up there in positive territory, just by a little bit we should note. Stock markets in Hong Kong and Shanghai are closed today for holidays -- Natalie.

ALLEN: Well, let's dig deeper into the global impact as we continue CNN's live coverage of the U.S. government shutdown.

Ben Collett is the head of Asia and Japan Equities at Sunrise Brokers and he joins us now live from Hong Kong.

Ben, what do you make of this ho-hum so far reaction from the Asian markets?

BEN COLLETT, HEAD OF ASIA AND JAPAN EQUITIES, SUNRISE BROKERS: Well, you know, I think by and large it really sums up the fact that no one, certainly investors in Asia and investors outside of Asia looking in know what to do in response to this. I mean, we've seen -- and as far as the Southeast Asian currencies know what to do -- know what to do in response to this. I mean, we've seen -- and as far as the Southeast Asian currencies go, we've already seen those come off significantly ahead of Ben Bernanke's expected tapering, but wasn't actually to be.

Now we're seeing the (INAUDIBLE) that are invested in the market, really somewhat at a loss as to how to interpret this information. We think that the net outcome of this for the next two weeks is going to be essentially a lack of volume going through the market. We really -- we really seeing an absence of direction here. So without wanting to -- without wanting to be vague, I think the markets are very, very confused. One thing that actually is not confusing is the risk appetite is very, very low right now so.

ALLEN: Right. During the last shutdown, way back in 1995, the markets just suffered a jolt and that lasted about a month. But things are very much different in 2013. So much fragility out there in the world. So it could be anyone's guess just how much of a pullback we might see.

COLLETT: Yes, for sure. I think first just based on this -- just based on the shutdown, I don't think it's unreasonable to expect the markets to hold up. But what it does, I think, make more likely is the tapering and lower interest rates are a natural conclusion to this -- to this event. Because what the event has done is create more uncertainty. And given the -- you know, in a period of uncertainty you go to your historically safety assets.

Now I'm not saying that treasuries, for example, aren't that safe, but I do think that under certain circumstances, tapering, which has been taken off the table, isn't going to be put on. So the natural response to that from an Asian point of view I think is probably more towards dollar weakness. More towards repatriation of funds to local currencies. I actually think we're going to see things like the yen strengthened.

But there's no real follow through in terms of equity market, certainly, that are drawn from this. Other than the fact that there is very little -- there's very little new information and there's no uncertainty on old information. Generally speaking we are expecting the markets to drift off. But that's more because volume, we think, is going to dry up. Certainly in risk appetite, again we are turning a table, which is historically and seasonally a potentially high-risk environment to start initiating new loans. So we do think the market should basically lose momentum and we think that that generally means given the market (INAUDIBLE) today we should see them come off.

ALLEN: All right. We appreciate your input. Ben Collett for us from Sunrise Brokers. We'll wait and see. Thank you.


COLLETT: Thank you.

VAUSE: Now you are watching our continuing coverage of the U.S. government shutdown. We'll take a short break here. Back in a moment.


JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: She also showed him her thong.



ALLEN: You're watching CNN's live coverage of the U.S. government shutdown. It has happened before and just as in the past, this one has gotten politicians' blood boiling and given comedians plenty of material.

But as Jeanne Moos reports, one of those previous stalemate even set the stage for an infamous sex scandal.


JEANNE MOOS, CNN SPECIAL CORRESPONDENT (voice-over): The clock was ticking.

UNIDENTIFIED MALE: Tick, tick, tick.


MOOS: Sometimes two clocks. People seemed to be getting ticked off.

UNIDENTIFIED MALE: With a compromised position, we passed --

ASHLEIGH BANFIELD, CNN ANCHOR: Congressman, that's not fair. Don't you dare put this back on me. You know full well -- no, no. You know full well you attacked Obamacare.

UNIDENTIFIED MALE: Wait a -- hold on, am I your guest? Whose bidding are you doing?

MOOS: Even bidding someone good morning could send them off.

MATT LAUER, MSNBC'S "TODAY" SHOW: Bill, good morning, good to see you.


MOOS: A shutdown showdown was enough to leave an anchor off-balance.

GEORGE STEPHANOPOULOS, ABC NEWS: The Senate simply going to pass -- and pass back to the House --

MOOS: And apparently some lawmakers on the House floor Saturday needed a drink. A "Politico" reporter tweeted, "I can smell the booze wafting from members as they walk off the floor."

Congress found itself the butt of shutdown jokes.

BARBARA WALTERS, CO-HOST, "THE VIEW": What does that mean to me?


UNIDENTIFIED MALE: When it -- how will we really be able to tell?

UNIDENTIFIED FEMALE: Here's what I don't understand, OK?

MOOS (on camera): Let's take a trip down memory lane to the last government shutdown, 1995.

(Voice-over): The year O.J. walked.

UNIDENTIFIED FEMALE: Not guilty of the crime of murder.

MOOS: And "E.R." was the number one show.

GEORGE CLOONEY, ACTOR, "E.R.": I was young, I was a fool.

UNIDENTIFIED FEMALE: You're still a fool.

MOOS: Seal had the song of the year at the Grammys. But Republicans and Democrats weren't kissing.

SEN. CHARLES SCHUMER (D), NEW YORK: You don't hold the government hostage. Plain and simple. You are. And everyone knows it.

MOOS: Sound familiar? 1995.

UNIDENTIFIED MALE: Don't put a gun to the head of the president.

MOOS: 2013.

AXELROD: But you can't do it at the point of a gun. MOOS: Wolf Blitzer looked a little younger back then, but covered the same old ground.

WOLF BLITZER, CNN ANCHOR: : So a very high-stakes game of chicken is at hand.

MOOS: 1995 was the year Drew Barrymore got on Letterman's desk and flashed him. And someone else flashed the president.

(On camera): It was during the shutdown that the Lewinsky affair started up.

(Voice-over): Jeffrey Toobin wrote a book about the sex scandal telling how Monica, the unpaid intern, was at the White House working since paid employees had been furloughed. It was the second day of the shutdown when she found herself alone with President Clinton.

TOOBIN: She questioned that she had a crush on him. She also showed him her thong.

MOOS: From there things progressed. The movie line that was big in 1995 applies just as well today.

TOM HANKS, ACTOR, "APOLLO 13": Houston, we have a problem.

MOOS: Jeanne Moos, CNN, New York.


VAUSE: Makes you miss the '90s, doesn't it?


ALLEN: So much so. Yes, I was here as well.

VAUSE: I'm John Vause.

ALLEN: I'm Natalie Allen. Another hour of CNN NEWSROOM straight ahead.