federal government shutdown

federal government shutdown

The Impact of Federal Government Shutdowns: Causes, Consequences, and Solutions

1. Introduction to Federal Government Shutdowns

The impact of a government shutdown is felt throughout the country. Not only do federal employees suffer, but businesses, local governments, states, and the economy at large are affected. This report discusses the reasons for a federal government shutdown and the processes that are required to implement a shutdown, as well as the major activities of the executive, legislative, and judicial branches during and after a shutdown. The report also discusses the effects of a government shutdown, including those that people may perceive as positive. It also includes historical shutdown and funding gap data for the past 30 years up to the current fiscal year and plans for agency operations during a funding gap. Finally, the report concludes by discussing potential legislative solutions to avoid similar problems in the future.

Each year, the federal government struggles with passing its spending bills in a timely manner to fund the routine operations of various federal agencies and the services they provide. These struggles often result in Congress never passing the necessary appropriations bills or the President failing to sign them into law before the start of the new fiscal year. In both circumstances, certain federal agencies may be forced to cease some, most, or in the most extreme case, all of their operations, and certain agency employees may be temporarily furloughed or asked to work without pay until either appropriations are enacted into law, continuing resolutions that maintain or change funding levels are enacted into law, or funding lapses are canceled by the enactment of new appropriations or continuing resolutions.

2. Causes and Triggers of Government Shutdowns

During the last forty years of U.S. history, the federal government has periodically shut down and not functioned. Government shutdowns typically occur when the president and Congress are not able to resolve, or do not agree to enact, 12 (partially or, and or complete) spending bills covering all major administrative agency, department, and office budgets. Oftentimes, the issues are not spending-related but are used by one or both leaders as a tactic to force or coerce the other to make policy concessions on unrelated issues or for partisan, ideological, or electoral reasons.

The Historical Warning Model presents that shutdowns are a result of a fundamental personality conflict, partisan and electoral considerations, or a power struggle between the president and the opposition party within Congress. However, the model is dated and fails in its predictions and tests and does not depict economic trends (i.e. periods of economic crisis or fiscal retrenchment).

Historically, government shutdowns have occurred throughout U.S. history, either tied to the regular appropriations process or from a failure to enact omnibus or continuing spending resolutions. Despite the fact that no comprehensive study of government shutdowns has been produced, many scholars have attempted to identify and explain the causes, triggers, and effects of shutdowns.

3. Consequences on Economy, Society, and Government Operations

A short shutdown has minor consequences for the American economy and government operations that historically have been tolerated politically with the perceived costs less than the benefits. A shutdown can temporarily slow the payment of refunds for previously filed tax returns if the IRS is closed, but the White House found out that no one notices nor objects if the federal government takes and does not give back tax money for the initial part of a quarter. Federal contractors and grantees likewise have their payments disrupted. Federal employees caught living from paycheck to paycheck can feel anxious about cash flow if they are temporarily furloughed. Federal and District of Columbia (D.C.) government employees are typically paid retroactively once the money starts to flow again.

The real cost of a shutdown is the long-term, permanent damage to the country’s economy and society. The damage to the government is more minor and fixable in nature. Over the last 30 years, before the 2013 shutdown, the cumulative opportunity cost is lost GDP and private sector employment had accrued almost to the size of a full-blown cyclical recession. Much of this output gap takes many years to recover. Much of the damage done to the economy, society, and government is contingent upon the length of the shutdown and seems, ceteris paribus, to be increasing in length. The social cost of a long shutdown to both the public and private management and administration of its impacts was often buried within and aggregated into the lost GDP and private employment data available post-event.

4. Historical Analysis and Case Studies of Government Shutdowns

The second type of lack of spending commitment is a work ‘stoppage’ which only involves those workers who are ‘non-essential,’ the term the White House uses. The non-essential group is fairly large (in 1980 over two thirds of all civilian employees of the Department of Commerce and the Department of the Interior are on the list) but at a great variance from the headline number than when total furloughs occur. Such an event happened in 1978 during the budget debate on September 30th to October 3rd. When a second degree of spending turmoil persists over a long period of time, we might begin to be concerned with lowering the level of effort by affected employees. For most employees, they can be reclassified as irrelevant at some substantially lower level than they are ultimately paid. The main exception appears to be for some pilots and armed guards within the Department of Justice. However, this group has no option to furlough workers, a second veto which is the more severe because the President is re-vetoing a bill he has previously signed. He must also issue a second veto message explaining why the condition in the first veto message is no longer valid. Moreover, the reason is that the second veto message is the one that has statutory validity. If the Appropriations Committees cannot agree on a new bill that the President is able, in his own words “to sign”, then the authority to run the affected parts of the federal government is removed. No money can be spent from a Treasury Account if Congress has not given specific and final approval of outlays in a particular appropriation bill. While this could be looked at as an extreme example of the appropriation role of Congress, the Tax bills require the money at a specified time. If the authorization over glad-handing the Congress says they do not wish the government to operate. They would argue that a three-week shutdown indicates that almost all government activities proven non-essential could produce the same result. This case will not be justified.

There are at least three types of situations during which some portion of the federal government has not been operating, over and above the normal absence from actual operation until authorization time. The first is that, under the terms of a temporary continuing resolution, operations of departments may stop during much of October in some years because final appropriations are not enacted until the first days of the fiscal year. This cessation, which affects primarily those activities whose absence would not be apparently great, is not classified as a closing down of operations in this study. The later finishing of departmental appropriations means that most levels of spending were agreed upon at an earlier, usually lower, figure. Usually, the next stage of operations, teams that begin to work to adjust differences, do not stop because of absence of binding appropriations. The closing of facilities has neither been intended nor noticed as extending over several years. The first genealogical chart in this paper estimates outlays for the Stennis Space Center from 1946 to the present.

4.1 Identification of Government Shutdowns

5. Proposed Solutions and Strategies to Prevent Future Shutdowns

Accordingly, our reforms are proposed in the general spirit of enhancing the ability of either principal to make a more informed demand about the vagaries of particular spending items. We propose to improve the regular operations of institutions. Defusing the constitutional time bomb of federal shutdowns demands not the courage of its men and women, but of the many fellow elected officials. Without compromising the superior aims of the Constitution, remedies are needed at the margins for Congress, or perhaps for both Congress and the president, to craft a resolution to the federal shutdown problem. In addition to potential changes to the current stalemate-breaking maneuver of countercyclical credit authorizations, reforms to the main and little Davis-Bacon Acts could simultaneously shrink the size of the federal safety net for federal workers while sending a blunt message to both the majority and minority leadership. In any future federal government shutdown, the interests of the hard-working majority of the federal workforce should evade reductions in benefits or wage rates. Even more radical remedies could restrict the “regular compensation” of many career federal employees. For instance, on the 1st day of any future federal government shutdown, all federal political appointees and senior staff with gross incomes twice the median earnings of full-time workers in all of nonmetropolitan areas in the United States during the latest 12-month period should be furloughed for the duration of the shutdown.

These data illustrate why we argue that one essential criterion for a solution to the problem of federal shutdowns is that any response to existing weaknesses in legislative-executive conflict resolution should willingly modify the current set of incentives facing the president, Congress, or both of these principal actors in the legislative-executive clash. Indeed, one normative takeaway of our work is that a mutually predictable concession to one’s opponent as a last resort is essential to make sequentially active multiple principals function well as a unitary actor. In proposing solutions to the problem, we classify reforms as addressing the aims of the constitutional clause that defines the aim of most main principals. Alternatively, they address the weaknesses inherent in collective action by multiple legislative-executive principals. Although the purposes of the constitutional compromises could address some fundamental problems inherent with federal governance, we believe that there is a more useful way to address shutdowns.