How the US shutdown can affect S'pore

The United States government began shutting down its non-essential services earlier this month after its politicians failed to agree on a new budget for the financial year starting on Oct 1.

The impasse is largely a result of party politics, with the Republican-controlled House of Representatives pushing for cuts to President Barack Obama's health-care Act, and the Senate, controlled by Mr Obama's Democrats, not budging.

The White House said last Thursday night that a talk between President Obama and Republican congressional leaders to end the budget crisis had gone well, although no agreement was reached.

Already, 800,000 federal workers have been forced to go on unpaid leave since Oct 1, with no guarantees of being paid later.

With the shutdown unresolved after 12 days, fears escalated that the stalemate could drag on and complicate a separate but looming battle, over the raising of the country's debt ceiling. The US government is expected to hit this legal borrowing limit on Thursday, and could run out of money to pay its debts if legislation is not passed to raise it.

Beyond the political implications, though, here are some ways the shutdown may affect you, some more detrimental than others.

1. US Embassy stops providing non-essential services

The US Embassy here might have replied to one of the last press questions in a while, when its spokesman said a few days ago that all non-essential services will be suspended. Apparently, dealing with the media is one such service. But Americans living here, and Singaporeans headed to the US for work and school have less to worry about, since the embassy will continue to provide consular and visa application services. The spokesman did not say what the other non-essential services are.

2. Lights-out at landmarks

Famed national parks and monuments, from the Grand Canyon in Arizona to Yosemite Park in California and the Statue of Liberty in New York have been closed, with travellers camping in the parks asked to leave earlier this month. Even roads leading to the parks have been blocked off where possible, so sneaking pictures will be hard.

In Washington, all of the Smithsonian Institution's 19 museums and galleries have also been shuttered, including the National Gallery of Art, as well as the National Zoo.

Besides tourists, the national park closures have also affected businesses that depend on tourist dollars. As a result, several states have appealed to the US Department of the Interior, offering to pay for the staff costs with state funds so that the parks can reopen.

The state of Utah has already struck a US$1.67 million (S$2.08 million) deal and will reopen its parks by today.

3. Research, funding halted

It is not a good thing that all scientific research conducted at public universities has been stopped. But looking on the bright side, students involved in research can now take a break. Then again, they may be in danger of taking a much longer break than they want, since research grants - most of which come from government funds - could also be cut.

4. New negotiation technique?

The story about how the US shutdown got linked to the debt ceiling crisis could become a lesson in reckless negotiations: make the stakes so high that the other side caves in.

In fact, Singapore Prime Minister Lee Hsien Loong had described it as a "game of chicken" in an interview with CNN.

The budget gridlock, and resulting shutdown, was the result of Republicans and Democrats not seeing eye to eye on the health- care reform law, dubbed Obamacare. So the shutdown, in effect, should have nothing to do with the debt ceiling.

But since it happened close to the Oct 17 deadline for the US to raise its debt ceiling, some Republican lawmakers are now trying to link the two issues, by threatening to vote against raising the borrowing limit unless the Democrats agree to scrap health-care reforms - essentially putting the global economy on the line in their bid to block a domestic law they do not agree with.

Whether it will work remains to be seen.

5. Plunging the global economy into crisis

Shutdown aside, the more crucial issue is that the US government could run out of money soon and this could spark an economic crisis that will most certainly be felt in Singapore. By the end of 2011, Singapore investors and companies had plonked $27.5 billion worth of foreign direct investment in the US, which will surely lose some of its value if the US economy starts teetering.

A failure by the US government to raise the debt ceiling will also force the US to default on the interest for its Treasury bonds, which could then lose its status as the safest financial assets in the world. If this happens, the value of the US Treasuries - of which Singapore holds about $101.6 billion - will almost certainly drop.

yuenc@sph.com.sg

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