federal government shutdowns

federal government shutdowns

The Impact and Implications of Federal Government Shutdowns

1. Introduction to Federal Government Shutdowns

The acrimonious landscape of U.S. fiscal policy has provided fertile ground for the political brinksmanship of fiscal confrontations. Since 1995, there have been approximately 17 government funding gaps producing 21 days of government shutdowns distributed over eight fiscal years. Most of these shutdowns have been very short, lasting less than a day. Longer shutdowns, however, impose significant economic and non-economic costs, with effects beyond those directly involved. Clearly, government shutdowns exert an impact on governmental functions and employees, who may be furloughed without pay, but businesses, states, and localities that receive government grants, contractors who sell services to government agencies, and people who participate in government-sponsored activities may also be affected. Moreover, government shutdowns may have secondary effects inspired by concerns about the economic consequences of such actions. For example, when the debt ceiling is approached, the risk of a government shutdown increases, and so too does pressure on interest rates from investors, who respond to the potential of the United States government’s forcing default.

On October 1, 2013, the U.S. Federal Government initiated a partial shutdown due to a lapse in appropriations. In the days that followed, signs of government shutdowns began to emerge: National Parks closed, the Bureau of Labor Statistics failed to release a highly anticipated jobs report, and the Internal Revenue Service released contingency plans emphasizing that tax season was still months away. With various media reports confirming what types of government activities were still funded, the public could glean a level of insight on the shutdown that has previously been rare, if not impossible. The information age is making the consequences of a government shutdown efforts to manage them, and the shutdown itself, more transparent.

2. Historical Overview of Federal Government Shutdowns

While some may view the shutting down of the federal government as just another arbitration or cut-off at home or in a state legislature, federal government shutdowns are qualitatively different from state government shutdowns simply because the federal government is so large and its activities so diverse. Because the federal government is central to the financial health and social well-being of every community in the nation, and because there are often a greater number of clearly identifiable innocent victims involved in a federal government shutdown (e.g., trust fund beneficiaries, federal employees, and the commercial establishments they patronize). Furthermore, when a federal government shutdown occurs, the public often blames Congress and the President for it. The story goes, “The salaries of members of Congress and the President continue at their proper levels, regardless of whether a budget has passed. Why shouldn’t the salaries of other federal employees? They both enjoy guaranteed employment security and salaries as long as they live, yet they receive the full salary from taxpayers before the start of the fiscal year and dedicate nearly 2 (or 3) months of the fiscal year (either before or after the start of a government shutdown and the suspension of payments to federal employees) adjourning (and sometimes doing nothing more than odd filing and rubber-stamping work) for weeks. So why don’t they and the President earn their salaries by debating and deciding the federal budget?”

3. Causes and Triggers of Federal Government Shutdowns

It explains that the constraint on appropriate behavior arises because entitlement program obligations must be paid out of money legally appropriated for discretionary programs. A second challenge follows from formal budget processes. It shows, using historical data on discretionary appropriations, that much of the discretionary spending visible in introductory budget summaries is intended for entitlement program obligations. The chapter uses national data from before and after the passage of the Graham-Rudman-Hollings Deficit Reduction Act of 1985 to study the link between the advent of perceived fiscal stress events and government shutdowns at the federal and state levels of government. The analysis helps identify institutional triggers, more problematic than widespread economic stress, that influence the probability of state and federal government shutdowns.

Shutdowns highlighted a challenge associated both with making commitments to achieve particular policy outcomes and simultaneously asserting that those very commitments prevent discretionary adjustment in the delivery of program activities. The search for mechanisms to avoid shutdowns and other discretionary spending decisions will necessitate careful attention to both the political and institutional drivers of spending outcomes and the potential trade-offs between commitment and discretion that are at the heart of the shutdown logic model. This chapter focuses on government shutdowns rather than the larger question of discretionary spending dynamics. The aim is to identify specific institutional features that have contributed to government shutdowns in the past in order to advance the cause of designing institutions that can avoid them in the future. A preliminary question addressed is, how is the option of shutting down discretionary government activities likely to differ in behavior across the levels of government?

4. Impact on Government Operations and Services

Federal agencies and programs are affected in different ways, depending on the availability of regular and multiyear funding sources; the number and duration of previous government shutdowns; and their own individual circumstances, use of available funds, and related authorities. These factors shape a wide spectrum of possible effects that ranges from minimal near-term impacts on some activities to substantial disruptions in others. It is important to recognize that the sooner the regular appropriations are enacted and permanent funding limitations included, resulting in implementation of regular agency operations, the lower the costs to agencies and the greater the overall effectiveness of their many important duties.

Federal budget authority for most government operations and programs generally expires at the end of the fiscal year on September 30, unless Congress passes and the President signs the 12 regular appropriations acts for the coming fiscal year. Federal and DC operations are affected only to the extent that new spending or obligation of funds is prohibited, either by included funding limitations or because the responsible agency has no appropriations available. Most periodic payroll payments continue to be made, however, because their periods are such that no funds are obligated except in payment for services rendered.

5. Strategies for Preventing and Mitigating Future Shutdowns

Restoring and preserving by appropriate action the essential dignity of the people’s representatives’ role in the appropriations process; providing the President with the authority to continue to fund exempted activities of the federal government in the absence of regular and continuing appropriations; determining whether carrying out such activities and providing compensation or payment should be postponed or modified in consideration and maximization of available funds; and true fiscal responsibility resulting from the statutory debt limit for the federal government would have to be addressed.

A key difference between the budget process and the appropriations process that plays a critical role in leading to a government shutdown is an appropriations act is a statute that allows spending above the limit of the budget resolution, assuming revenues.

– Reserve funds would be created to operate functions of the government for a temporary period of time when appropriations bills have not been enacted for the fiscal year. – Solutions for dealing with federal government spending and revenue policies would be proposed. – Solutions for dealing with federal government shutdowns as a result of budget disputes. – Solutions for dealing with federal government financial management. – Solutions for avoiding a federal government shutdown as a result of a fiscal policy dispute would be submitted.

The purpose of this chapter is not to present an exhaustive list of solutions, but rather to outline possible legislative and administrative remedies for preventing or mitigating the effects of future federal government shutdowns. A review of various counsel merges into several general remedies, including the following: