Trump, Democrats 'budget on parallel tracks'... Signs of prolonged U.S. federal government shutdown

Shutdown, third day

Congressional deadlock could last at least a week

Republicans and Democrats clash over Obamacare

White House "Thousands of federal workers will be fired"

'Blue state' budgets also cut

New York stock market has so far been little affected

The U.S. federal government shutdown entered its third day on the 3rd (local time) but shows no sign of being resolved. Observers say it could last more than a week in the current situation. The ruling Republican Party and the opposing Democrats are running on parallel tracks over reductions in tax credits related to the nationwide health insurance program, Obamacare.

The Donald Trump administration and the Republican Party appear to be aggressively pressing the Democrats rather than seeking a compromise over the shutdown. They are especially pressuring Democrats over the possibility of firing federal employees. The Trump administration's hardline stance, which appears to be using the shutdown as an opportunity to shrink the government, increases the likelihood that the stalemate will be prolonged.

President Donald Trump said on his social media platform Truth Social that he would meet with Russell Vought, director of the White House Office of Management and Budget (OMB), "to hear recommendations on which of several 'Democratic institutions,' most of which are political scams, to cut and whether those cuts would be temporary or permanent." This was interpreted in U.S. political circles as implying a permanent large-scale layoff of federal employees. White House spokeswoman Karoline Leavitt also said in broadcast interviews that the number of federal employees to be fired "would amount to thousands."

The Democrats also show no sign of backing down. They are arguing for an extension of Obamacare subsidies that expire at the end of this year and oppose cuts to Medicaid under the Trump administration. The Republicans, meanwhile, say they oppose the Democrats' demands because those measures could provide medical benefits to undocumented immigrants.

For this reason, the Senate is expected to bring the temporary budget bill back to a vote in an effort to end the shutdown, but it is not expected to be easy. In that case, the shutdown could continue at least through the 6th. Senate Republican Whip John Thune said, "Tomorrow (the 3rd) there will be a fourth chance to vote to end the shutdown," adding, "If that also fails, we'll take some time over the weekend to consider and then revote on Monday."

The prolonging of the shutdown is also influenced by President Trump viewing this as an opportunity to cut budgets supported by Democrats. The Trump administration has been pressuring Democrats by saying it is cutting budgets centered on 'blue states' where Democrats are dominant. On the first day of the shutdown, the U.S. Department of Energy canceled funding for about 300 projects in 16 states that Democratic candidate Kamala Harris would carry in the 2024 election. The roughly $8 billion in cuts could lead to the loss of tens of thousands of jobs. The Trump administration also decided to freeze $18 billion in funding for two major infrastructure projects related to New York City: the Hudson River rail tunnel and the Second Avenue subway construction in Manhattan.

Despite the shutdown, on the 2nd the New York stock market remained strong and all three major indexes closed at record highs. Investors, based on past shutdown experiences, are optimistic that the impact of a federal government work stoppage on the U.S. economy will be limited. Adam Turnquist, chief strategist at LPL Financial, said in an interview with Fox Business, "Looking at past cases, investors have tended to largely ignore the issue," and "What investors ultimately focus on are corporate earnings and the overall direction of the economy."

New York=Shin-young Park, correspondent nyusos@hankyung.com