The US Capitol in Washington, Saturday, September 28, 2013, with the midnight Monday deadline fast approaching for Congress to break an impasse over funding the government. (AP Photo/J. Scott Applewhite)
Shortly after 2 pm today the Senate stripped several of the House GOP’s amendments from a short-term funding bill and sent the legislation back, making it all but certain that a partial government shutdown will occur at midnight.
The economic impact of a shutdown depends on how long it lasts, but workers and the poor are likely to be hit the hardest. About 800,000 of 2.1 million federal employees will be furloughed, with no guarantee of retroactive pay. “Essential” employees like active-duty service members, scientists posted to the International Space Station, mine inspectors for the Department of Labor, and Secret Service agents will continue to work, many without pay. The members of Congress creating the mess are considered essential, and will receive their paychecks.
Low-income women and children, on the other hand, may not be able to access food and health care. That’s because federal funds will not be available for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides food benefits and clinical services. States may have enough cash to continue operations for a few days, but even federal contingency funds “would not fully mitigate a shortfall for the entire month of October,” according to the US Department of Agriculture, which administers the program. Food stamp recipients would still receive their benefits through the SNAP program, but other nutritional programs would shut down.
Several Head Start programs, which have already experienced crippling budget cuts under sequestration, would feel immediate effects and may be unable to offer educational services to children. By late October, the Department of Veteran’s Affairs will run out of funds to pay compensation and pension to more than 3.6 million veterans.
The DC area would feel the shutdown most acutely. According to the New York Times the federal government employs about 30 percent of the workers in the District of the Columbia, 20 percent of those in Arlington County, Virginia, and 10 percent in Montgomery County, Maryland. Because of the sequester government workers have already been hit with pay freezes and furloughs, and 330,000 people in the region lost their jobs.
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“Our members have already suffered through six days of furloughs this year, we’ve been in a three-year pay freeze and there’s been a constant threat of job loss. It’s been a year of total uncertainty,” said J. David Cox, president of the American Federation of Government Employees, the nation’s largest federal employee union. According to Cox, most of the union’s members make between $35,000 and $40,000 a year. “Federal employees have given enough. We’ve given [billions of] dollars to the federal deficit. It’s time to quit looking to us to be the bargaining chip.”
The District would be legally bound to curtail all of its services, including garbage collection, and to furlough all but essential employees. Frustrated by the lack of budget autonomy in the District, city leaders have made their own plans, which include declaring all workers essential and drafting legislation to pay them with a contingency fund.
Although the shutdown isn’t expected to be catastrophic, as would a default on the national debt (which will happen if the debt ceiling isn’t raised by October 17), failing to fund the government will still cost taxpayers. The shutdowns of 1995 and 1996 cost $1.4 billion, about $2 billion when adjusted for inflation. That figure is probably low, as Ezra Klein points out, because it leaves out the lost value of uncompleted work and revenue lost from actions like shuttering the national parks.
The immediate effects of a shutdown would also ripple out to businesses and the stock market. “The government plays a huge role in the markets—that’s the case in every advanced economy. If it’s not functioning it’s simply going to hurt many aspects of the everyday economy,” said Jared Bernstein of the Center on Budget and Policy Priorities. Piling another crisis on top of a feeble economy could shake consumer confidence, which plummeted during the debt ceiling standoff in 2011. Not knowing if they’ll be paid retroactively, furloughed employees are likely to reel in spending. “We’re already dealing with a recovery that’s too weak from that perspective,” Bernstein said.
To avoid a shutdown or to end it the House and the Senate will have to agree on a short-term spending bill that’s likely to maintain funding at current levels. But if the Continuing Resolution lasts only a week or two, Congress will soon be back in the same soup. On the other hand, a longer CR locks in a bad budget, helping to turn post-sequester spending levels into a new normal. According to the Congressional Budget Office, maintaining the sequester’s spending cuts would cost hundreds of thousands of jobs next year, and reduce gross domestic product. “We are very much defining ‘normal’ downwards,” said Bernstein. “In many ways, the solution we’re all hoping for is one that locks in its own version of dysfunction.”
Ultimately, the millions of Americans waiting for a budget that addresses long-term unemployment and wage stagnation, that provides adequate funding for public services and that strengthens the economy as a whole will be hurt by a government shutdown and any other delays in the passage of a long-term spending bill. But instead of governing, the GOP will turn the lights off—and even that won’t stop the Affordable Care Act rollout.
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