US shutdown

Confused about US government shutdown!? The ominously named US federal government shutdown is a product of unique American governance system in which any piece of legislation must be ratified not only by the legislature represented by the House of Representatives and the Senate, but also by the executive branch, represented by the White House.
Though this is the first shutdown in the last 17 years, the shutdown itself is not without precedence. The federal government has faced shutdown 17 times in the last 40 years.
Under the Anti-deficiency Act of US Constitution, the federal government is prevented from incurring of obligations or expenditures in excess of funds appropriated. Often, the two Houses of Congress are unable to reach a consensus on an annual budget before the beginning of fiscal year.
In such a situation, the House moves a continuing resolution authorising government agencies to fund their operations at the current level until a formal appropriation bill is ratified by both branches of the government. In case of failure to build consensus over the joint resolution, all federal non-essential functions cease immediately, initiating the shutdown.
This time around, the threat of a shutdown became clear on Sunday when the Republican-controlled House of Representatives attached amendments to Obamas healthcare programme suggesting delay of Obamacare by a year and repealing a tax on medical services.
The Senate immediately rejected the bill and sent its own clean version, which too was rejected by the House; the ping-pong act prompted Citi Groups chief economist Willem Buiter to comment that "the worlds largest economy looks like the land of Oz run by the munchkins".
As a result of this shutdown, nearly 818,000 of 2.9 million civilian employees of the federal government are estimated to have been sent on indefinite unpaid leave. However, the situation is still far from an anarchists dream come true: shutdown only means that there is no money for discretionary spending.
Federal agencies whose job is essential to protect life and property of the US citizens also remain unaffected by the shutdown. In other words, mandatory federal spending not subject to congressional appropriations continues unaffected. And ironically, these include social security services including the "Patient Protection and Affordable Care Act", infamously known as Obamacare, which is at the heart of this debacle.
Till the time of writing this, the markets reaction has been modest. Historically, stock markets have done just fine during government shutdowns.
However, the US economy will not remain completely unaffected. According to Vincent Reinhart, chief economist at Morgan Stanley, a 15 basis point drag is expected on fourth quarter real GDP as furloughed workers will put less than usual number of hours.
The Bureau of Economic Analysis announced the unavailability of economic data due to "lapse in government funding". If the shutdown is drawn out, it may become a black hole for investors, since hard data on jobs, imports, construction and housing prices will not be prepared for several days until after the debacle is over.
While shutdown does not mean an Armageddon for US economy, fears remain that the Republican may drag the shutdown till mid-October, when the US government is expected to hit its current debt ceiling of $16.7 trillion. The Republicans may link a deal on debt ceiling with killing those provisions of Obamacare they loathe, since the Obama administration will be in no position to call its bluff. However, Buiter warns "if the shutdown inhibits a deal to raise the debt ceiling, leading to a potential sovereign-debt default, it could pull the rug from under the global economy".
That, and the fact that NASAs Astroid Watch will not post any updates during the shutdown, could mean the end of the world as we know it.