The US government shutdown prompted growing concern of wider economic consequences when it stretched into a third day on Thursday, and President Barack Obama challenged Republicans to "stop this farce" by allowing a straight vote on a spending bill. Both sides in the standoff, which was triggered by Republican efforts to halt Obama's healthcare reforms, appeared entrenched.
Republicans in the House of Representatives are planning at least 10 more small bills to reopen specific federal programs, according to a senior Republican aide. Democrats reject that piecemeal approach. Fears grew that the crisis would merge with a more complex fight looming later this month over raising the federal debt limit and that this could stymie any attempts to end the shutdown before the middle of October.
Obama said there were enough Republicans willing to pass a spending bill immediately if House Speaker John Boehner would allow a vote on a spending bill without partisan conditions attached, a so-called clean vote. But Obama said the speaker was refusing to do so because "he doesn't want to anger the extremists in his party." "My simple message today is 'Call a vote,'" Obama said in a speech at a construction company in Maryland.
"Take a vote. Stop this farce, and end this shutdown right now." Work in Congress was interrupted on Thursday afternoon when the U.S. Capitol was locked down briefly due to gunshots fired outside the building. One female suspect was shot after a car chase across Washington and one Capitol police officer was injured, U.S. officials said.
Police said it appeared to be an isolated incident with no connection to terrorism. The security alert halted work in both the House and the Senate and shifted attention from the shutdown which has idled nearly 1 million Federal workers, many of them in the Washington area.
"I think for a moment maybe some of the other big issues that are going on in the Capitol sort of went away for a moment as we were focused on what was happening as it was developing," Republican Representative Kevin Yoder from Kansas told CNBC.
In his speech earlier, Obama warned that as painful as the government shutdown was, a default caused by a failure to raise the debt limit would be dramatically worse for the economy as a whole. Boehner's spokesman said the speaker had "always said that the United States will not default on its debt."
"He also always says that there aren't votes in the House to pass a 'clean' debt limit bill. That's why we need a bill with cuts and reforms," the spokesman said. Though some moderate Republicans have begun to question their party's strategy, Boehner so far has kept them largely united with the small bills to re-open national parks, restore health research and other parts of the government most visibly affected by the shutdown. The Tea Party Express, one of the anti-tax groups in the conservative Tea Party that has led the fight against Obamacare, sent an email to supporters on Wednesday evening saying that as many as 12 Republicans had indicated they were willing to "give up on the fight" and join Democrats in voting for a funding bill without conditions.
"We need your immediate support to put pressure on the weak Republicans to pass a sensible solution that allows America to avoid the Obamacare train-wreck, while fully funding the federal government," the group said in its email. The U.S. Treasury warned about the impact of a debt default in a report on Thursday, saying a failure to pay the nation's bills could punish American families and businesses with a worse recession than the 2007-2009 downturn.
"A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket," the Treasury said. "The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse," it said.
Stock markets worldwide fell on Thursday while the dollar dropped to an eight-month low over concern the budget standoff would merge with the coming fight over raising the $16.7 trillion U.S. borrowing limit. The president of the San Francisco Federal Reserve Bank, John Williams, said he was nervous and worried about the impact on financial markets of a prolonged shutdown of the federal government, particularly if no action is taken to raise the nation's debt ceiling.
The U.S. Labor Department on Thursday said the government's September employment report, the most widely watched economic data both on Wall Street and Main Street, would not be released as scheduled on Friday due to the shutdown.
The shutdown was beginning to hit the factory floor, with major manufacturers like Boeing Co and United Technologies Corp warning of delays and employee furloughs in the thousands if the budget impasse persists. Rosalind Brewer, chief executive of discount retailer Sam's Club, an arm of Wal-Mart Stores Inc, said a few of its outlets had already seen a significant impact from the shutdown.
"What we're really concerned about right now is what's happening with the furloughs. We're actually seeing a little bit of softness from the government layoffs," she said. Republicans have tried to tie continued government funding to measures that would undercut Obama's signature healthcare law.
Obama and his Democrats have refused to negotiate on a temporary funding bill, arguing it is the duty of Congress to pay for programs it has already authorized. Obama reiterated that message on Thursday and ridiculed comments by one Tea Party-backed congressman, Marlin Stutzman of Indiana, who told The Washington Examiner: "We're not going to be disrespected. We've got to get something out of this, and I don't know what that even is."
"You have already gotten the opportunity to serve the American people. There's no higher honor than that," Obama said. "The American people aren't in the mood to give you a goody bag to go with it." The shutdown took effect at midnight on Monday (0400 GMT on Tuesday), leaving nearly a million federal workers sidelined without pay and many others in the private sector suffering from the knock-on effect. But some workers are going back to work.
The White House said the Federal Emergency Management Agency (FEMA) had started to recall employees idled by the shutdown as the Gulf Coast braces for potentially damaging Tropical Storm Karen. Republican Representative Steve King of Iowa, speaking on CNN's "New Day" program, said Republicans were looking for solutions but Democrats were refusing to negotiate. But he gave no sign of softening the stand against Obamacare, which passed into law in 2010 and is in the process of being implemented.
"If there is a bump in the economic road, if there is a political penalty to be paid, we can recover from those things," he said. "But we can never recover if Obamacare is implemented on the American people, and it will diminish the trajectory of the American destiny by turning us into a dependency society."
Despite the shutdown, Republicans have failed to derail Obama's controversial healthcare law, which passed a milestone on Tuesday when it began signing up uninsured Americans for subsidized health coverage. Obama blamed the shutdown on Republicans' "obsession" with reversing healthcare reforms passed in the Affordable Care Act, but noted they had passed the House of Representatives and the Senate and been deemed constitutional by the Supreme Court.
"Last November the voters rejected the presidential candidate that ran on a platform to repeal it," he said on Thursday. "So the Affordable Care Act has gone through every single democratic process, all three branches of government. It's the law of the land. It's here to stay."