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CNN LIVE EVENT/SPECIAL
The U.S. Government Shuts Down
Aired October 1, 2013 - 02:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN BOEHNER, SPEAKER OF THE HOUSE: I'm not going to negotiate. I'm not going to negotiate. I'm not going to do this. Well, I would say to the president, this is not about me. And it's not about Republicans here in Congress. It's about the fairness for the American people.
JOHN VAUSE, CNN HOST: An angry Speaker of the House of Representatives, at an impasse in Washington, sending the U.S. government into a shutdown. You're watching live coverage here on CNN. I'm John Vause.
NATALIE ALLEN, CNN ANCHOR: And I'm Natalie Allen. We want to welcome viewers in the U.S. and around the world to our coverage this hour. The U.S. government shutdown now in its second hour, some 800,000 workers are being furloughed until an agreement can be reached on funding the government.
VAUSE: In the meantime, nonessential workers will either stay home or be turned away in the morning. Many government offices will be closed along with national parks and museums. But law enforcement, Social Security and the Postal Service will not be affected.
ALLEN: The shutdown became a certainty late Monday when the Senate again rejected House efforts to use a stopgap spending bill to derail ObamaCare.
VAUSE: President Obama tried to rally congressional leaders with phone calls in the hours leading up to that latest vote.
ALLEN: Just a short time ago, House Republicans voted to keep the ObamaCare amendments attached to the spending bill and then requested negotiations with the Senate, even though the idea was already rejected by Senate Majority Leader Harry Reid.
How will a government shutdown affect daily life in the U.S? Take a look. First, hundreds of thousands of federal employees are being furloughed and federal offices will be closed. That said, critical workers, including air traffic controllers and food inspectors, still have to go to work but without pay.
All military personnel also remain on duty. They will continue to be paid, thanks to a bill adopted unanimously in Congress on Monday and signed by the president.
However, hundreds of national parks, as we mentioned, museums, zoos, they are all closed. Millions of visitors will be turned away from there.
The last time there was a shutdown thousands of passport applications went unprocessed, meaning tourism and airline revenues could take a hit. But the State Department says it will continue visa and passport operations overseas.
VAUSE: Yes. But the contentious issue at the center of this shutdown will go ahead as planned. The health care law, known as ObamaCare, goes into effect, despite the shutdown. Starting today, Americans can buy into that program that's designed to provide affordable medical care for millions. Now Republicans and other groups argue, the law is too intrusive.
ALLEN: Let's go to Washington for the latest in our live coverage of the shutdown. Joe Johns staying up with us at our Washington bureau.
And Joe, let's talk about what we just mentioned, the fact that this shutdown has come about because of the vehemence toward ObamaCare on the part of Republicans. And some people might be wondering, why is this one issue the thing that brought down the U.S. government right now?
JOE JOHNS, CNN CORRESPONDENT: Bottom line is, Republicans, conservatives, many of them in the government say the program is simply too expensive. It costs too much. And they see it as part and parcel of the greater problem of government spending in the United States, Natalie, and they say something has to be done about it.
So that's why you see it coming up now. That's why it could also spill over into the issue of increasing the debt ceiling in just a couple of weeks. It's all about the spending. And Tea Partyers say that's a key part of their agenda that they want to address during the Obama administration, Natalie.
ALLEN: Many years ago the shutdown was between, let's see, Newt Gingrich and Bill Clinton. Now it's between Barack Obama and John Boehner. But he's got some folks on his side, Mr. Boehner does, that he can't rein in.
So what might be next between these two? Who reaches out to whom or what will be the next step after everybody gets just a few hours of sleep tonight?
JOHNS: Right. Well, there are a hundred different scenarios. But the bottom line is, either you get a short-term spending bill to keep the government operating while you continue to try to negotiate this thing or you let the government remain closed for business, as it were, and continue to try to negotiate with the gun at your head, as it were.
So, those are really their options. But at some point the Speaker of the House has to get with the varying factions in the Republican Party and try to come to some agreement that people will be happy with and figure out how the to get the government running again. That's probably the bottom line option. ALLEN: We already heard from Harry Reid late into the night, who said he would not negotiate with a gun to his head. But there could be a change there?
JOHNS: Yes, well, you'll -- I mean, something's got to happen. You know, there was this late night news conference about 1 o'clock am here Eastern time in the United States where Speaker Boehner, at the end of a very long day, comes out and talks to reporters about what got accomplished and what didn't get accomplished here. Listen to some of what he had to say.
(BEGIN VIDEO CLIP)
BOEHNER: The House has voted to keep the government open, but we also want basic fairness for all Americans under ObamaCare.
QUESTION: What do you say to those workers, sir?
(END VIDEO CLIP)
JOHNS: Looks a little disgusted there, if you ask me. John Boehner has been in the House of Representatives a long time. In fact, he was in the House of Representatives, if I remember correctly, at the time of the last government shutdown, some 17 years ago. So he's been around the barn a couple of times. And he knows this is a very difficult position for the highest ranking Republican in the Congress.
ALLEN: Difficult position for a lot of people as they hear about this news. Joe Johns for us there at our Washington bureau. Joe, thank you. Over to John.
VAUSE: Something's got to happen, wise words from Joe Johns.
Now U.S. markets were down on Monday. There was some expectation the shutdown might happen, maybe it wouldn't. But there was uncertainty. That's why the markets were down. They open again about seven hours from now. A lot of people trying to figure out how much this shutdown will actually cost.
Maribel Aber is tracking all of that for us.
It's counterintuitive because you would think if the government shut down and people weren't getting paid, you'd save money. That's not the case.
MARIBEL ABER, CNN CORRESPONDENT: You'd think so. But let's break it down a little bit, John.
One analyst at Moody's estimates that furloughed workers will lose out on $1 billion in wages every week. So, if the shutdown lasts, let's say, three to four weeks, it could cost the economy $55 billion.
Now, you're just talking earlier about the last government shutdown in 1995-96. That cost the U.S., to put this in perspective, $1.4 billion, or about $2 billion in today's dollars. It's because in past shutdowns, furloughed workers have gotten back pay, right? So all the work that piles up during the government shutdown still needs to get done, so pretty much you're being paid for a vacation there.
Closed parks, museums are more than just an inconvenience, John. That means lost revenue. So the Congressional Research Service estimates that during the last shutdown the government lost 9 million visitors to national parks, museums and monuments. That means entrance fees aren't collected, and then canceled trips mean less tax revenue from hotels, flights, restaurants. So this shutdown, John, could cost the U.S. even more.
VAUSE: OK. And you mentioned the last time the government was shut down, that was during the '90s. The economy was so much better. And a lot of people have shrugged off this latest shutdown, saying well, you know, bounce back pretty quickly, the stock market recovered.
But it's very different now. This economy is not nearly as resilient as it was 17 years ago.
ABER: That's right. Very different. We're in unchartered territory right now, unprecedented. The economy that we're seeing right now is still very fragile. Experts say that this could derail our economic recovery here in the U.S.
Remember, unemployment still stubbornly high here. The housing market is just starting to really come back. And if it goes as far as default, interest rates would likely skyrocket, which would really put the brakes on any kind of recovery. Ss stay tuned, John.
VAUSE: Right. Absolutely. Maribel , thank you, Maribel Aber. Again, early morning duty, late night duty. Call it what you want there in Washington, thank you.
ALLEN: We keep talking about the impact because everyone wants to know, who will be impacted, how will people be impacted.
Up next, what happens to the military and those on active duty?
What about veterans as well that depend on the government?
We'll have more about it ahead.
VAUSE: And we'll talk to Americans who live overseas about how the government shutdown is playing out around the world.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: If I ran my house the way the government is running the country, I would be bankrupt.
UNIDENTIFIED MALE: You've made your point. Let's get on with the business of running the country and pass the budget, pass the debt limits and let us keep improving the economy. Don't play games anymore, please.
(COMMERCIAL BREAK) (MUSIC PLAYING)
VAUSE: Welcome back. You're watching our continuous live coverage of the government shutdown just after 2 o'clock in the morning. And shortly after the shutdown took effect, President Barack Obama addressed the members of the military. Mr. Obama said those service men and women in uniform will continue to get their paychecks and on time.
But civilian workers at the Department of Defense will likely face furloughs. He also reassured those serving in harm's way.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: 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.
(END VIDEO CLIP)
ALLEN: For more on how American expatriates are viewing this government shutdown, we're joined by two guests, Emily Landis Walker, she's a spokeswoman for Republicans Abroad in the U.K. However, she's not abroad today. She's in Naples, Florida.
And Robert Carolina, chairman of Democrats Abroad in the U.K. He joins us from London. He is abroad.
Thank you both for talking with us.
Emily, let's start with you because a lot of people are blaming the Republicans for the government shutdown.
How do you think this is going to be seen around the world and what are your thoughts on that?
EMILY LANDIS WALKER, REPUBLICANS ABROAD, U.K.: Well, obviously I recognize that the blame is going to the Republicans. And some members in the Republican Party have believed that this -- their vote and their -- the policies they're following represent what their constituents are calling for.
But I really believe that this is a crisis of leadership in Washington. And for those around the world watching this, this is not helpful for the United States and how we are perceived abroad. And I do believe that it is a crisis of leadership for our politicians in Washington, including that of the president.
Robert, let's get your thoughts on that same thing.
ROBERT CAROLINA, DEMOCRATS ABROAD, U.K.: Well, I agree there's a crisis of leadership. I think the breakdown in leadership is more at the feet of John Boehner and the Republican caucus and the House of Representatives.
This is 40-something times they've looked for any kind of leverage they can find to repeal a law that's already been passed, already been approved. But that's really not the story today. The story today, from people I'm talking to, Americans around the world, are nervous about what the shutdown means for them.
We have to remember that there are hundreds of thousands of Americans who serve with the U.S. federal government, who are stationed overseas. I've already heard from some of our members who say they're, frankly, very nervous about this, because they have family members who are going to be furloughed. The ones who are civilians, they might have pay delayed.
And they have got bills to pay. And it's a very upsetting moment for them.
ALLEN: Emily, let's get your perspective on that.
Who are you talking with and what are you hearing as far as people's concerns and how this impacts their lives?
WALKER: Well, of course it impacts people's lives. And I think Robert made a good point there.
But in addition, it reflects the -- it puts American leadership globally in a bad light. We've had a lot of issues that have been impacting expats overseas, including the issues related to the Middle East.
And I think it's important that America gets its act together in Washington and is able to fund our government, not only currently but also as it approaches the debt ceiling. It has a huge economic impact and a huge leadership impact.
ALLEN: It's interesting that you look at all that's going on in the world, with the problems with the economy in Greece, the problems in Spain and elsewhere, and you see people taking to the streets and looking for leadership somewhere. Now it's not coming from the United States.
How do you think, Emily, this is going to -- how are other countries going to react to what they're seeing happen in the U.S.?
WALKER: Well, I'm not sure exactly how they'll react but it is clear this is not putting the United States in a good position. And it's both Houses, the Congress and the Senate and the president. This is unfortunate that they can't come together as they did in Ronald Reagan's days, when they could actually work together to get through some of these very difficult issues and lead as the United States should be leading.
So it's our hope, I think, as both Republicans and Democrats at this point, that the government can function correctly and that they can work together and develop a process to put our country back where it should be in terms of operating the federal government. It's incredibly important.
ALLEN: We're certainly all hoping for that.
Robert, let me give you the final word as far as your perceptions on how we're being viewed by people elsewhere and there in London.
CAROLINA: Well, I think that the impact on non-American citizens hasn't been felt yet. But certainly the last time there was a major government shutdown, one of the biggest impacts was the delay in processing visa applications for people who wanted to come and visit the U.S.
So if this thing drags on too long, a large group of people who are going to feel the bite are people who are planning trips to the U.S. who suddenly discover they can't get their visas through. Now this morning, the latest I've seen from the U.S. embassy in London is they're anticipating normal operations today, but people need to keep an eye on that to see what's going to be the impact on their travel plans.
ALLEN: Absolutely. Because they say they're going to let that go through this time. They didn't last time, as you mentioned. But we'll wait and see how people are affected who are abroad.
We thank you both, Emily Landis Walker for the Republicans Abroad and Robert Carolina with the Democrats Abroad. Thank you both. We wish you well.
Over to John.
VAUSE: OK, Natalie.
The U.S. government is shut down, but still to come here on CNN, another brewing political battle could have a much bigger impact on global economies, because the U.S. may just run out of cash in just two weeks.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: How sad, what a shameful day this is in the history of the House of Representatives.
NANCY PELOSI, HOUSE MINORITY LEADER: It's brutal. It's brutal.
REP. STEVE ISRAEL (D): The American people deserve two things: a government that stays open and a Congress that communicates. Our view is we should keep the government open and communicate with the conference. The Republican view is you can only do one, you can talk but close the government. And the American people deserve better than that. (END VIDEO CLIP)
VAUSE: Welcome back. You're watching CNN's live coverage of the U.S. government shutdown. It's been shut down now for two hours and 20 minutes.
Now, the opposition of the conservative Tea Party Republicans to ObamaCare paved the way for this gridlock. But a leader of the movement is calling the government stoppage Harry Reid's shutdown. She faults the Senate majority leader for repeatedly tabling the legislation sent over from the House, and she spoke with Piers Morgan.
(BEGIN VIDEO CLIP)
AMY KREMER, CHAIR, TEA PARTY EXPRESS: We have Democrats that have come out against ObamaCare. I mean, the unions are against it. Even the person that wrote it, Max Baucus, is calling it a train wreck. It's like Harry Reid is acting like a spoiled brat, crossing his arms.
There's nothing wrong with ObamaCare. We're not going to do this. We're not going to discuss it. As if they keep saying it, it's not true.
No, it's failing. We need to have this discussion. And if it's so great, what are they afraid of?
PIERS MORGAN, CNN HOST: Well, ObamaCare was, of course, debated vigorously. It passed both chambers. It was signed into law, upheld by the Supreme Court and of course was front and center in Barack Obama's re-election last year.
So all in all --
KREMER: I completely disagree with you.
MORGAN: -- I would imagine the president has a fairly good claim to say we've been down this road and --
KREMER: No, no, this (inaudible) --
MORGAN: -- and what the hell does this have to do with shutting down the government?
KREMER: -- this legislation was passed not with one Republican vote. And it wasn't even passed through the normal process. They had to use a procedural trick to get it through because they knew they couldn't get it through.
(END VIDEO CLIP)
VAUSE: A procedural trick called reconciliation, which is a budget measure, which indeed, she is correct. It did not have one Republican vote to support it, which is an indication of how deeply divided the Democrats and the Republicans are when it comes to the president's signature health care law.
Of course, the question now is, how long will this government shutdown last? That will mean how much of an impact it will have on the economy. We also want to find out how it is that we managed to get to this point.
Let's go to Lisa Desjardins, who is standing by now in Washington with more on this.
So, OK, tell us, Lisa, how did it come to this and is there a possibility, maybe, of a compromise somewhere?
LISA DESJARDINS, CNN RADIO CORRESPONDENT: You know, it would be nice to think that a compromise could be coming soon. And that's not impossible.
But, John, the answer to that question is sort of in the answer to the first, which is how did we get here?
This is a fight that has been brewing for years. They've been putting off these major budget decisions because Republicans and Democrats can't agree on how large government should be and it has come to a head right at this point.
Now, is a compromise possible? We'll see.
I'm going to tell you first of all where exactly we are now. After back and forth, back and forth, over the last three days, it has come down to this moment where House Republicans say they want to go to a conference committee, which is where the House and Senate usually would get together to work out differences.
But Senate Democrats, President Obama's party, they say that's just a ploy, because they're not going to compromise. They say all they want is a spending bill with nothing else attached. What's the point of a conference committee?
In other words, John, both sides are accusing the other of blocking compromise.
VAUSE: And that's what you call politics.
VAUSE: OK. So we're at the situation now, where, eventually as Joe Johns said, something has got to happen. The big question is when will that happen, when will they manage to work this out?
Maybe that woman was right, the Tea Party leader, when she said they are behaving like spoiled children, but I think that would apply to all of them.
But the reality is, the shutdown is actually having an impact, it's having an impact now. And the longer it goes on, the worse it gets.
DESJARDINS: That's right. In fact, it's having an impact at this exact moment. I just got this e-mail from a source here. You obviously can't read it from there.
But this is an e-mail that went out to custodial and other staff here at the Capitol, telling them, this is a frustrating time for us and our families. We're sorry to tell you that we don't know what's going to happen with you. We don't know what's going to happen with your pay.
But hang in there, which is difficult for people to hear, especially many of the custodial staff here I know works more than one job. They depend on this income. They will not be getting this income after today.
In fact, just at this hour the custodial staff is doing their last rounds. They tell me they won't be back, the overnight shift, until this shutdown is over. And this is just the beginning: 800,000 workers will be going on furlough tomorrow. And then millions of other federal workers will show up on the job because they're considered essential, but will not be getting pay.
The one exception is military troops on active duty will be getting paid. They made a special exemption for them.
But, John, it's going to be that. And I think right now there are families sitting at home probably watching us on CNN, trying to figure out how they're going to pay the bills. So, it's a very big deal.
VAUSE: Hang in there, that's the best they got. Lisa, thank you.
DESJARDINS: You got it.
ALLEN: Very well said.
Up next here, our live coverage of the U.S. shutdown continues.
VAUSE: We're keeping a close eye on global markets for investor reaction.
ALLEN: Also the immediate impact on Americans, as Lisa was just talking about. We'll dive more into that and we'll also talk about those visiting the United States. We'll see what they won't be able to visit. Stay with us.
ALLEN: Welcome back to CNN's live coverage of the U.S. government shutdown, the product of deadlock between the House and Senate over a stopgap spending bill.
There's the number on your clock.
VAUSE: (Inaudible) two hours, 27 minutes.
Democrats in the Senate have repeatedly defeated House Republican efforts to the measure to delay ObamaCare.
ALLEN: But the House and Senate will be back in session in about seven hours. We'll see if they can come to an agreement on how to end the shutdown and to fund the U.S. government.
VAUSE: So, U.S. government services will stay open despite the shutdown. That includes air traffic control and airport security. So, take note, if you have a flight coming in or out of the United States. You won't be affected by the shutdown.
Also U.S. embassies and consulates will remain open. Most passport offices will also be in business unless they're in a federal building that's 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 remain on duty.
ALLEN: Well, so for the first time in nearly two decades, the U.S. government has shut down. We want to take a closer look at what this could mean for global economies and for Washington's image overseas.
Robin Niblett is the director of independent think tank Chatham House; he joins us now from London.
Thanks for joining us, Robin.
ROBIN NIBLETT, DIRECTOR, CHATHAM HOUSE: Pleasure. Thank you.
ALLEN: Let's talk, first of all, the easy question, the image problem, I guess, the U.S. gets an F on that one. What's your perspective?
NIBLETT: Well, it's a little shocking, I think, after the Syria vote and the uncertainty over how Congress would relate to the presidency to see now immediately after this yet another big bust-up, a big train wreck between the presidency and Congress.
I think most people outside the U.S. have been looking at the U.S. as actually doing very well in the global economy. Housing up, the economy in the U.S. growing at slightly faster rates, certainly than Europe.
And this amazing sense that America somehow was detached from some of the worst aspects of the global financial crisis, a strong energy sector.
People generally think of the U.S. as doing well. Suddenly this crisis comes along. And all those doubts that were there the last time the U.S. argued over the debt ceiling re-emerge, and people look at things like the crisis in Italy, Greece, the Eurozone in an entirely different light. So the U.S. is a very important bellwether for global confidence. ALLEN: Yes, exactly. We've been seeing so many people from different countries and Europe taking to the streets to protest their governments. And they have had this slow and steady improvement in the U.S. economy to look to, perhaps for hope as they see no hope for jobs in their countries, and now this.
And some around the world might be surprised at just what a huge issue the ObamaCare issue is for many in the House of Representatives.
NIBLETT: Well, certainly compared to most other countries where, OK, health care is an important issue, but the kinds of changes that appear to be put in place by ObamaCare or the Affordable Care Act, you know, these are so minor, miniscule, compared to other parts of the world, that we wonder whether there's something much more fundamental, a kind of breakdown between that checks and balances system that people have admired so much of the U.S. system of government, that somehow it's going to disable the U.S. from playing a leadership role internationally and from being able to manage its own economy domestically.
We like to think that, irrespective of what goes on inside the Capitol Hill, somehow the U.S. economy just motors on at its own rate. But that's been disproved in recent years, in the sense of a loss of direction not just in global leadership but potentially also in domestic leadership.
ALLEN: And what are your concerns if this shutdown drags on?
What are your concerns as far as the growth that the U.S. economy has seen?
What does that mean?
NIBLETT: Well, you know, the U.S. is a huge economy, $15 trillion or so a year, same size as the whole of the E.U., so the European economy has been relying somewhat on a pickup in the U.S. to drive exports, to be able to keep money for investment flowing into Europe.
China is the alternative. But as we've all discussed, China's own growth is dropping off from high rates. China is trying to move towards a focus on consumption and away from exports and investment.
And so China itself is going through a change. So we've been hoping that if China slowed down a bit, Europe could rely during its own slow growth pickup, on the U.S.
The U.S. slows down, where do you turn to for global growth? There's nowhere else that's going to pick up the slack.
ALLEN: And a lot of people have already started to talk, Robin, about the debt ceiling debate that has to come up just in a few days.
What are your concerns there?
NIBLETT: Well, you feel that even if some deal is done to stop this government shutdown over the next two or three days, some sort of cobbled together compromise, we're going to hit this debt ceiling problem that caused such angst about two years ago and led to a downgrading of the U.S. debt.
So in that sense, I suppose, yes, we're very worried that there will be a second knock-on if people start to worry that the U.S. won't be paying back at some level this international debt, that huge, huge total number. It's not maybe large as a proportion of U.S. GDP, but it is enormous within the global markets. This is definitely going to have knock-on effects.
ALLEN: Well, we thank you for your perspective from London for us. Thanks very much, Robin Niblett with Chatham House there in London. Thanks.
VAUSE: OK, Natalie, we'll have more on the U.S. government shutdown coming up this hour.
But first, a few other stories we're keeping a close eye on.
(BEGIN VIDEO CLIP)
VAUSE (voice-over): Today at the United Nations, Israeli Prime Minister Benjamin Netanyahu will be the last national speaker at the General Assembly. This comes one day after meeting with U.S. President Barack Obama at the White House.
Meantime, Syria's foreign minister spoke at the General Assembly on Monday and he talked about the conflict in his country.
WALID MOALLEM, SYRIAN FOREIGN MINISTER (through translator): Syria has repeatedly announced that she embraces a political solution of its crisis. It is now for those who claim to support a political solution in Syria to stop all hostile practices and policies against Syria and to help the Geneva without preconditions.
ALLEN (voice-over): Well, reports say more than 50 people have been killed, dozens injured in a wave of attacks in and around Baghdad. Most were car bombings in the Iraqi capital, Shia neighborhoods. It appears to be the latest sectarian violence to hit the country.
VAUSE (voice-over): Kenyan lawmakers are set to begin their investigation into possible intelligence failures ahead of the massacre at Nairobi's Westgate Shopping Mall. Legislators visited the scene on Monday and are still asking anyone with extra additional information to come forward. Sixty-seven people were killed during the siege on September 21st. Militant group Al-Shabaab claimed responsibility for the attack.
ALLEN (voice-over): Authorities in Chicago, Illinois, are trying to solve a mystery. They're investigating why a commuter train that was parked and empty somehow moved onto a rail line and smashed into another train that was filled with passengers. Dozens were injured. Officials are trying to determine if there was a mechanical failure or the train was deliberately set into motion.
(END VIDEO CLIP) VAUSE: OK. Well, still to come here, a lot more of the U.S. government shutting down and what it could actually mean for Asia.
ALLEN: Will there be ripple effects across the region if the stalemate drags on? We'll take a close look next.
VAUSE: Markets in Hong Kong and Shanghai are closed today for a holiday. But let's take a look at how other exchanges are doing.
Nikkei actually finished in positive territory. Australia, the ASX 200 down a touch, about a quarter of a percent. Seoul actually also up just a little in positive territory, shrugging off the shutdown.
Welcome back. You are watching live coverage of the U.S. government shutdown here on CNN. We'll take a global look at the global impact of the shutdown, especially in Asia.
Ben Collett, who's the head of the Asia (inaudible) Japan equities at Sunrise Brokers, he joins us from Hong Kong.
Ben, markets come and go. They go up, they go down. But let's talk about what accredited nations like Japan and China and all those countries that buy T-bills that keep the U.S. economy ticking over. They don't care about ObamaCare but they do care about stability.
How will they look at the events of the past few hours?
BEN COLLETT, ASIA AND JAPAN EQUITIES, SUNRISE BROKERS: I think specifically China, as far as we can tell, is going to be a net benefactor of this, other than the fact that from the fact that they can sit here and sort of point and go, aha, you have got some problems with democracy over there.
The fact -- the actual result of this particular decision, A, will increase the focus and I think increase the ability of the debt ceiling debate to impact the market and it's going to make markets much more uncertain.
So I think from a Japanese debt point of view or certainly from the guys holding U.S. Treasuries, I think effectively we really see this as kind of a higher probability that tapering is going to be put back. Certainly even less likely (inaudible) the Fed needs to make the decisions.
So what it does I think is really increase the trend that we've seen of late. That is some buying and some holding of Treasuries.
But right now, as you pointed out, as we discussed earlier, we don't think the markets -- the credit markets are going to respond directly, at least in these nations and certainly not in Japan. What we do perceive, though, that's going to happen is that the net benefactor of all of this is that China and China's ability to finance its own operations, certainly on a governmental level, really without recourse, without these sorts of issues, I think, is really becoming obvious, certainly on a relative (ph) basis. So the net impact, we think, in Asia, is probably a win, 1-0 for China versus U.S., in terms of asset allocation.
VAUSE: The bigger nod here, though, is how long will all of this drag out, will it be a shutdown for a day or two, will they get back together and then they'll move on and then the next crisis is the debt ceiling and will they avoid that?
But if this drags on and there is a significant impact on U.S. growth and the economy, that will have a knock-on effect to a lot of countries in Asia, especially those export-driven economies, China, Thailand, the Philippines, Korea.
COLLETT: Yes, for sure. If you just look at the headline numbers, like 800,000 people have just been added into the unemployment figure effectively, and what we think will happen the assumption that the markets are making, is that sooner or later these guys are going to get together and sort it out.
But I think one thing that is being overlooked, and I think very quickly will be realized, is that without the ability to respond or to publish data as promised and as they need, the economy is going to suffer. And whether it's just this $300 million a day in terms of net reduction on the U.S. GDP, is going to make forward thinking and forward trading very, very difficult without this sort of data.
So, it's added a much bigger question mark, I think, to the growth for the U.S. over the next quarter or two than we can actually analyze at the minute.
And that's why the markets are going to slow down and I think it's also why the market's going to be much more sensitive to maybe less what would otherwise be less impactful headlines. So, this is really stage one of the bunny in the headlines kind of stunned response that we're going to see.
But what it means is, you know, when the U.S. turns one way or another, we're going to see -- arguably we could see a much more significant impact in Asian markets, particularly in Japan, because volumes are going to go down. The smaller volumes, it takes much smaller issue, I think, to drive these things one way or the other.
VAUSE: I was just going to say, we've seen this kind of kabuki theater so often in the United States.
I'm just wondering, big picture here, is there always kind of a stunned disbelief (inaudible) that this has actually happened, that they actually did pull the trigger and they go into a shutdown?
COLLETT: Yes, yes, for sure. Asia's like, what? What? If you look -- like I said, if you look at the headlines, all of a sudden 800,000 federal employees are unemployed, it is quite unbelievable. And I don't think we really get it. And whether it's just denial or apathy or lack of comprehension, we don't know.
But certainly we spoke to -- I spoke to a lot of large fund managers, small fund managers, FX traders, arbitrage guys, and the fact of the matter was, their net response was we're not going to do anything yet.
What this does do is make it much easier to push around some of the larger and more institutional -- institutionalized holdings. Because if you've got -- I think if I'm sitting there, I'm a federal employee, I start to look at my 401(k) and wonder where that's going, these guys -- and we are, without wanting to be overly dramatic, we are entering October, which historically is not a very good time for the markets.
So I think the other really interesting thing is that the VIX index, the measure of volatility of overall risk to the market, is not really responding, or it certainly hasn't had a chance to yet, to respond. But we're expecting a large spike in that.
If that doesn't happen, I think we really are underestimating the impact of this. So, the simple fact of the matter, I don't think we understand -- certainly I don't understand. We don't know how we should play this yet. But it does mean we're getting -- we're going to be getting into the office a little earlier and we're going to be reading headlines a lot later at night before we go to sleep.
VAUSE: I guess that's fair enough. We're only two hours and 43 minutes into this. I guess we'll have to see how this plays out during the day or the next couple of days. Ben, thank you; Ben Collett there for us in Hong Kong.
COLLETT: Thank you.
ALLEN: Well, today not only marks the start of the U.S. government shutdown, it also marks the debut of a key provision of the law at the heart of this political standoff. And that would be the new ObamaCare insurance exchanges located across the United States. Tom Foreman now looks at how those exchanges are expected to work.
TOM FOREMAN, CNN CORRESPONDENT: Despite all these monumental changes to health care, most of us who have insurance probably won't see much change, maybe some modifications. But this is about the 48 million people who are uninsured, about half of whom are now expected to buy insurance through these health care marketplaces. And let me point out, about 7 million are expected to do so by the end of the year. That's how fast this is happening.
So, how do we imagine these marketplaces? Think about a store where you can buy one of four different insurance plans, bronze, silver, gold or platinum. Here's the difference between them. Look at the bronze plan over here.
If you buy this, you're going to have a lower monthly premium, but when you go to the doctor, your co-pay, your deductibles, your other fees will be higher.
At the other end of the spectrum, if you buy the platinum plan, you're going to spend more on your monthly premium, but when you go to the doctor, you'll pay less money.
This won't be exactly the same state to state to state because local companies are involved, so you can't call a family member living up in New Hampshire, for example, and say, what are you doing, because it may be different in Mississippi.
But this should be the same no matter where you live, there should be no higher premiums if you get sick. There should be no denial of coverage if you have a preexisting condition.
And you should have no fees for preventive care. If you get inoculations for your kids, if you get a mammogram, if you get a routine physical, you shouldn't be paying for that under this new plan. Still, there is money to be paid.
And for a lot of people who don't make much money, this may seem very expensive; that's why the government is going to help out. If you make $46,000 a year as an individual or $94,000 a year as a family of four or less, the government is going to give you a refund to help pay for your insurance under this new plan. But no matter what happens, you're going to have to get involved.
Even if you live in one of the dozens of states that have said they want nothing to do with ObamaCare, you're still going to be involved. All that means is your state government will not be involved in organizing this health care marketplace. The federal government will do it there, instead of your state government.
You'll go to a federal website to sign up. But you will have to do something, otherwise the federal government is going to fine you for not having insurance. That's what this is all about. And that's why it really is decision time coast to coast.
ALLEN: We need more of Tom Foreman explaining as this law, even though the government is shut down, this law does go into effect today.
VAUSE: That's the irony. The government shut down; the thing they wanted to stop is going into effect.
VAUSE: Well, if you plan to travel to the United States, maybe take in a few sights, try calling ahead because your plans may have changed.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: These are some of the great features that D.C. has to offer with the zoo and, you know, the museums and things like that. So when they're shut down, it really takes away from things that families can do.
ALLEN: Yes. Up next here, the impact of the U.S. government shutdown on the nation's most popular tourist destinations. Much more ahead here. Stay with us.
VAUSE: Welcome back. We have a lot more of the U.S. government shutdown in just a moment. First, a major tropical system is taking shape in the Western Pacific, stands to impact a lot of people.
ALLEN: So we shook Ivan Cabrera out of his chair. He's been watching our coverage.
VAUSE: It is nice to have you here.
IVAN CABRERA, AMS METEOROLOGIST: Good to see you both. The Weather Department never shuts down here at CNN.
ALLEN: The weather never shuts down.
CABRERA: Listen, and over the next few days, the Western Pacific has turned into a typhoon factory here. It's just unbelievable. We had the last storm, Wutip, that has now gone across Southeast Asia. But this is the one I'm paying around the table to now. It's a tropical storm but I do think it has the potential to become a strong typhoon.
We have only about three days to get ready. If you're watching us from the southern Japanese islands you must get ready for a strong typhoon here. We could in fact have winds over 200 kilometers per hour by the time we get into the next three days. It is going to make a run for the southern Japanese islands and eventually potentially impacting the Korean Peninsula. So we'll watch that closely.
Winds right now not that strong but that is going to change as it did with our last typhoon. This is Wutip here, look at this, right before landfall. What you want to see is the storm weakening. When you see an eye like that, that is the opposite of weakening. It's strengthened as it made landfall.
Do we have the video from the landfall there? Just incredible.
Pictures coming out of Hainan, also of course Vietnam getting impacted, which is where the eye made landfall just in the last 24 to 48 hours. But just as quick as it moved in it has certainly dissipated.
The tragedy here with this storm, the three fishing boats. Did you hear about this? Off the coast of Guangdong, they were out there; 88 fishermen, 74 still unaccounted for. And they are still doing search and rescue operations. They're doing so with not weather like that. The storm has since cleared. So that is certainly good news.
Look behind me, you'll be able to see that what we have at this point here is just some clouds left over, a few showers, but certainly nothing, look at this, this storm is just vanishing here. And that is good news, but as I mentioned, we have more on the way with the Fitow that is going to be taking center stage over the next few days.
Now if you're watching this from Tokyo, we do have this storm as well. This is Sepat. I'm not so worried about any damage or any significant impacts here.
I think the worst will be in the next couple of days, if you have a flight into Tokyo, probably going to see some delays, because we will have some gusty winds as this storm continues to move off to the north and east.
So like I said, a typhoon factory here in the Western Pacific, guys, over the next few days. We'll keep an eye on all of them. There are two storms after the ones we're tracking that are still yet to form. So we're going to be busy. No shutdown here.
VAUSE: Not shutting down. You're going to stay on the job, unlike the U.S. government. Thanks, Ivan.
Budget battles shut down the U.S. government twice during the 1990s. The federal government shut down for 21 days from December 15, 1995, to January 6, 1996. And before that, for five days, November 13th to November 19th. U.S. officials say those shutdowns cost a combined $1.4 billion and 800,000 federal employees were furloughed.
Newt Gingrich was Speaker of the House then. And earlier, on Piers Morgan, he compared the relationship between himself and then President Bill Clinton to the relationship between the current Speaker, John Boehner, and President Obama.
(BEGIN VIDEO CLIP)
NEWT GINGRICH, FORMER HOUSE SPEAKER: The burden is largely on the president just by nature of the job, but the fact is that they are in a much weaker position to negotiate than Bill Clinton and I were, partly by personality and partly by design.
We both had -- and I think Dick (ph) would agree with us -- we both had a terrific capacity for compartmentalizing. So there was a part of us which would fight and a part of us which would negotiate. And we didn't let the fighting stop the negotiating. We also didn't let the negotiating stop the fighting.
(END VIDEO CLIP)
VAUSE: Wise words.
ALLEN: Maybe they can call in Gingrich and Clinton to help them this go-around.
VAUSE: I think their days are over.
VAUSE: Among the places affected by this stalemate in the United States are museums as well as national parks.
ALLEN: Yes, people just wanting to have some fun and the tourists who have come all the way to the United States, one of the most revered sights, of course, in the entire world is also one that cannot be seen. Poppy Harlow tells us the very symbol of America will be seen by tourists and patriotic Americans only from afar.
POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Liberty Island was slammed by superstorm Sandy, closed for eight months. Now another shutdown.
HARLOW: What does it mean for to you visit the Statue of Liberty?
STACY GARCIA (PH), LIBERTY ISLAND VISITOR: Freedom, liberty. That's why I'm in America. So, to hear that the government is shutting down, it's like, what have we come to?
HARLOW (voice-over): Stacy Garcia (ph) is among the last visitors to the island.
UNIDENTIFIED MALE: (Inaudible) statue (inaudible) Lady Liberty.
HARLOW: So along with a government shutdown comes the closure of all the nation's national parks, and that includes Lady Liberty. So for folks coming to New York to see the iconic Statue of Liberty, this may be their last chance in who knows how long.
UNIDENTIFIED MALE: It's going to be awful. It's also going to damage the economy in ways that nobody has bothered to calculate yet. It's just mindless.
HARLOW (voice-over): With more than 280 million visitors a year from Yellowstone to Yosemite to the Grand Canyon, more than 400 national parks are now closed.
ROBERT SIEGERT, TOURIST FROM INDIANA: I'm not going to let Congress, you know, make me miss the Statue of Liberty, which is so important to me as a retired history teacher.
HARLOW (voice-over): Tourists turned away. More than 21,000 national parks employees furloughed and thousands more, like clean-up crews and concession stand workers, all left without jobs.
VICTORIA DUNCAN, EMPLOYEE ON LIBERTY ISLAND: I have to find another job if, like, they're not paying us while we're laid off or file for unemployment. But it's still not going to be enough. It's hard; even to think about, it's hard to think about.
HARLOW (voice-over): Quinn Agard (ph) says he needs this job just to get by. And he doesn't have a plan B. HARLOW: Do you have a message for Washington?
QUINN AGARD, EMPLOYEE ON LIBERTY ISLAND: Things like this can have such a big impact on the people that aren't in the limelight, you know, the people that are working hourly positions at spots. This whole island will be shut down. So that's a ton of different positions that people won't be working and won't be getting paid for.
UNIDENTIFIED MALE: New York City's boat is headed back to New York City, guys.
HARLOW (voice-over): Liberty Island sees up to 4 million visitors a year, 20,000 a day in peak season. That's $17 per ticket for adults. That's big money.
UNIDENTIFIED MALE: Even more than the money, it's the fact that there are folks that, you know, this is a once-in-a-lifetime opportunity for a lot of folks.
HARLOW (voice-over): An opportunity that means a lot for so many, like Stacy Garcia (ph) -- Poppy Harlow, CNN, New York.
VAUSE: How are you going to be, you've bundled the kids onto the plane, you've flown 14 hours, or whatever it is, and you want to go --
ALLEN: It's your big moment.
VAUSE: You want to go to the Statue of Liberty and they're like, sorry.
ALLEN: That just doesn't seem fair.
We're sorry. On behalf of all of us here in the United States, sorry.
VAUSE: Well, I'm not American so I don't have to apologize.
VAUSE: The House did wrap up for the night just less than an hour ago. They continued working even though the government shutdown went into effect about almost three hours ago now.
ALLEN: Take a look now at some of the debate, of late debate on the House floor.
(BEGIN VIDEO CLIP)
REP. NITA LOWEY (D), N.Y.: You're bowing to the extremists, the Tea Parties, who really don't want to see this process move forward. We know that the Affordable Care Act is the law of the land. We know it's been affirmed by the Supreme Court of the United States. Let's move on.
REP. DANA ROHRBACHER (R), CALIF.: It's not like the president says there will be no negotiations. No -- he'll negotiate with foreign dictators before he will negotiate with us.
REP. BRAD SHERMAN (D), CALIF.: What if Democrats said we're going to shut down the government if we don't get immigration reform, gay rights or gun control?
REP. ROBERT PITTENGER (R), N.C.: The truth, you can't handle the truth. Mr. Speaker, we have shown the other side how premiums are going up 200 percent, 300 percent. We've told them about the loss of jobs.
REP. DAVID SCOTT (D), GA.: You have been hijacked by a small group of extreme folks who simply hate this president.
REP. DARRELL ISSA (R), CALIF.: How dare you presume a failure? The fact is -- the fact is this country is based on people saying they won't do things, and at the end of the day, coming together for compromise.
(END VIDEO CLIP)
ALLEN: You're going to hear a lot more finger pointing, I would think.
VAUSE: It's only just begun.
ALLEN: It's only just begun. Both the House and Senate are due back in Tuesday morning. That's about seven hours. We'll see if they're able to break the stalemate and end this government shutdown. Much more coverage in our next hour.
VAUSE: Including live reports from CNN correspondents in the United States as well as around the world. We'll be back after a very short break.
VAUSE: It is 3:00 in the morning in Washington where political deadlock has shut down the government. You're watching live coverage right here on CNN. Hello, I'm John Vause.
ALLEN: And I'm Natalie Allen. We want to welcome viewers in the U.S. and around the world. Thanks for joining us.
VAUSE: Deadlock over a stopgap spending bill has forced the U.S. government into a wide shutdown. There is no agreement on the spending measure, because House Republicans insist on tying its passage to a delay in ObamaCare. And Senate Democrats just refuse to accept it.