The Next Government Shutdown(?)

The date for the next government shutdown is set. April 29th, 2017. Maybe.

As if this isn’t dramatic enough, this date happens to lie up to be the 100th day of the Presidency of one Donald Trump. If you want the history of this “first 100 days” thing, you can find more information here. There you’ll learn that it took Napoleon Bonaparte 100 days since being exiled to return to France and once again name himself the French ruler. Compare that progress with this Trump report card.

But what does a government shutdown actually mean? Who does it affect? Will it even happen?

First, I will briefly explain what a government shutdown means. Then I will go over the history of government shut downs. I will spend the bulk of this post talking about the current threat of a shutdown and which obstacles stand in the way.

Disclaimer: I’m a hobbyist economist. This is the history and logistics of legislative failure. And this story is moving fast so if some details are incorrect, give me some leeway.


What Is A Shutdown?

The official term is a “spending gap.” Wikipedia offers a pretty hefty explanation:

In U.S. politics, a government shutdown is the process the Executive Branch must enter into when the Congress creates a “funding gap” by choosing not to or failing to pass legislation funding government operations and agencies, or, after the Congress passes a bill to fund the government and sends it to the President, the President vetoes that bill.

HOLY RUN-ON BATMAN!

What they’re saying is that a government shutdown occurs when Congress, or the President, fail to pass legislation to fund operations managed by the government.

Personnel considered non-essential are put on furlough, meaning some employees are given a temporary leave of absence.

They are not paid nor are they allowed to work, but they might be paid once the shutdown ends. They can’t even check their email from home. Active duty military members and government employees who are not furloughed work as normal but may not be paid as scheduled.

Some of the things that happen include:

  • National parks and museums close
  • Passport applications might stop
  • Trash collection stops in Washington DC
  • The Center for Disease Control cuts some services (this means a slower response to an outbreak)
  • Congress still gets paid salary plus benefits (including taxpayer subsidized healthcare)

Sources: [1], [2], [3]

This doesn’t sound so bad for the economy. Luckily for us, the Obama Administration as well as the Congressional Research Service both put out reports about what happened in the last shutdown (which is considered the worst and most severe of all the federal shutdowns we’ve experienced).

The basics of the White House report can be found here. About 6,600,000 million days of work were missed due to 850,000 employees being furloughed. The total cost in salaries for these employees was two billion dollars. Not only that, 120,000 jobs in the private sector were not created due to the shutdown. $4B in tax refunds were delayed. Some health and safety inspections were canceled. Government-sponsored scientific research was put on hold.

From a higher-level overview, it is estimated that 0.2-0.6% of GDP growth was lost in the two weeks that the government was shut down. In reality, this number is probably too low. According to the Bureau of Economic Analysis, the GDP grew by 4% in the fourth quarter of 2013. That means we lost anywhere from 5% to 15% of quarterly GDP growth. In two weeks!

To recap: During a government shutdown, some federal employees go home. They are not paid during the shutdown but might get paid after it ends. National parks and museums (like the Smithsonian) close. The federal government loses productivity and time. And our GDP growth was affected by 5-15% during the 2013 shutdown.

I did get a request to discuss the powers of the government during a shutdown. Unfortunately, there is next to nothing that I could find, including the powers and responsibility of the President (besides bill veto power).


The History of Government Shutdowns in the United States

All of the government shutdowns since 1976 (when the contemporary budgeting process began) have taken place when the party of the Presidency differed from one or both chambers of Congress. This would be the first one where one party controlled both legislative houses as well as the office of the Presidency.

The last shutdown took place in October 2013. Depending on who you ask, there are different culprits.

The real culprit appears to be Senator Ted Cruz. He wanted to keep funds from reaching the Affordable Care Act because he doesn’t believe in subsidized healthcare. Except, you know, that’s exactly what he gets from the taxpayers.

My favorite (sarcasm) source is Breitbart, who called out Obama for using “sick children as pawns” and blames Obama personally for what happens during a shutdown. They even called him out on the topic of golf, which I find hilarious because [1] and [2] (this second one is from Snopes).

Other than that, I’m going to cheat. Read through here for a history.


The Current “Crises”

The most important thing to note is that a new spending bill requires Democratic votes to avoid a filibuster. Not only that, we have seen that ultra-conservatives will not easily toe the party line. So the GOP, in disarray and requiring that pesky compromise, needs to find a way to avoid a shutdown before improving the disapproval rating even more.

In 2013, there was talk of defaulting on the debt repayment. That was tied to the debt ceiling which isn’t in play this time around. If you want to know what happens when Congress does not increase the debt ceiling, nobody knows. There’s a pretty good guide here if you want more information. And besides, “government default risk” is fear-mongering and should be ignored; it shows a blatant misunderstanding of Economics 101 because government debt is not the same as household debt.

The best part, in my opinion, is gambling. As of writing, the betting odds of a shutdown sit around 8%, the lowest since betting opened. How this works is if you believe that the government will face a shutdown, you buy a share for $0.08. If you’re right, the website will pay you $1. If you’re wrong, you lose $0.08 (per share). You could win $0.92. You can also bet that there will not be a shutdown.

If you want to read the White House proposal, you can read it here: 2018_blueprint. I’m hosting it here because of stuff like this. My favorite tidbit is this:

Our $20 trillion national debt is a crisis, not just for the Nation, but for every citizen. Each American’s share of this debt is more than $60,000 and growing.

Again, not at all how this works. Refer to this previous blog post if your alarm bells didn’t go off at the word “crisis.” To simplify things, look at the following graph from this FiveThrityEight post:

casselman-budget

So why might there be a shutdown?

There are a few reasons why. The first one I found (I’ve been writing this for a few weeks waiting for the story to develop more) was the infamous wall. (Wait, I thought Mexico was going to pay for that? No.) The author of the quote above, Trump’s budget director Muck Mulvaney, told the Associated Press that the budget priority of the White House is “wall funding” and “[immigration] agents.” The Democrats are against this, as are some Republicans. A news story came out today (April 25) that the White House is dropping funding for the wall out of this bill, though.

Another group of interest is the House Freedom Caucus, the same group who helped tank the Trumpcare bill because they wanted more funding to be cut. This group, according to Wikipedia, has 32 seats in the House. Republicans have 237 seats total and need 216 votes to pass. If the House Freedom Caucus goes against a bill, the bill does not pass (unless Democrats vote for it).

President Trump, for all his business savvy, seems to think that he can pass a new healthcare bill before his 100 days are over. His analysis and confidence go hand-in-hand:

The plan gets better and better and better, and it’s gotten really, really good, and a lot of people are liking it a lot.

The plan from Trump appears to be using the Affordable Care Act as leverage, either funding portions of it if he gets his wall or leaving it without funds. Because the lives of Americans only matter on election day or for rating comparisons. To clarify: More Trump voters will be affected by a repeal of the ACA. Trump talked about having higher ratings than 9/11, which only scratches the surface of how he feels about that day.

To recap: The issues with avoiding a shutdown stem mostly from the border wall and healthcare, and one of these issues might not be an issue now.

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