government shut down

government shut down

The Impact and Implications of Government Shutdowns

1. Introduction to Government Shutdowns

Among the most visible immediate impacts are millions of federal workers being furloughed or being asked to work without pay before getting paid retroactively. This has a terrible effect upon their productivity, morale, their families, and the communities where the workers live and work. In the last government shutdown, 27 days in January 2019, it is estimated that 800,000 federal workers were furloughed or worked without pay. Disabling some government services occurs during a shutdown, making the public notice federal government agencies being either reduced or entirely halted. Finally, the public and society also may suffer, as some impacts upon citizens do occur. There is a great cost of goods and services placed upon citizens and the frustration of major government contractors. Such costs may become much worse and adversely impact U.S. citizens well into the animated future. Therefore, well-spent time and energy should prevent future lengthy government shutdowns.

A government shutdown occurs when either Congress fails to approve government funding for the new fiscal year, which starts on October 1, or the President and Congress cannot agree on a budget for the coming fiscal year. There have been 20 government shutdowns of varying length and impact since 1976. These occur just about every year, but they are generally over very quickly and without any real fanfare. It is the longer, more devastating government shutdowns that have been more documented and also have provided an opportunity for researchers to actually observe the impact of a partial government shutdown upon regular citizens and society. This paper begins by explaining the overall primary and secondary impacts of U.S. federal government shutdowns. Key impacts will be outlined for states and local governments, state and local public programs for their constituents, the national economy, and individual citizens. Finally, recommendations for avoiding government shutdowns will appear.

2. Causes and Triggers of Government Shutdowns

Another major cause is disagreements or contested issues between Congress and the President. These discrepancies may relate to budget policy. A third cause of shutdowns is disagreements or policy struggles within Congress. These disputes are known as interbranch, interparty, or intraparty conflicts or arm wrestling. Disputes over policy choices occur in the ordinary policymaking process as a consequence of decision-making rules, separated institutions sharing authority, and divided party control. Such conflicts can result in a delay in the approval of regular appropriations. Disagreement is the “failure of an action or command to achieve its aim,” and the inability, incapability, or unwillingness to cooperate in seeking or achieving a desired goal between Congress and the President can result in a holdup and a lapse in appropriations. Policy differences or interbranch, interparty, or intraparty disputes are often resolved through informal or compromise negotiations, logrolling, compromise, or bargaining. Shutdowns can be used by or forced onto the President or by Congress to accomplish policy goals.

A government shutdown is a lapse in discretionary federal funding due to the absence of appropriations. Some government shutdowns occurred prior to the enactment of the Antideficiency Act of 1870. Since then, the frequency and impact of shutdowns have varied greatly. There are numerous triggers of shutdowns. One major cause of shutdowns is disputes between the President and his or her supporters within Congress and the President’s opponents within Congress. These disagreements involve budget policy. A policy is a “plan or course of action, as of a government, political party, or business, intended to influence and determine decisions, actions, and other matters.” Congressional disagreements over fiscal policy can result in a holdup and a delay in the enactment of regular appropriations.

3. Effects on Government Operations and Services

At the start of a fiscal year, each executive branch agency and department typically has funding for their operations and services already in place for the upcoming fiscal year through the regular appropriations process. When it cannot do so, a lapse in funding happens. Although the full scope of agency operations at the start of a fiscal year can vary slightly from year to year due to changing factors, in general, each agency and department suddenly lacks the money to carry out many of its services. This may include employing workers, awarding new federal financial assistance, or issuing new federal regulations (except for appropriations laws). However, the impact of a shutdown on each agency or department can differ depending on the amount of work funded by multiyear appropriations or no-year appropriations.

A government shutdown has far-reaching effects on the departments, agencies, and employees of the federal government. Not only do federal employees face financial hardship during a shutdown, but the operations and services of different government entities are affected as well. One of the effects of a shutdown is the inability of government entities to fulfill their missions and carry out functions. A shutdown also disrupts federal funding for the District of Columbia government. Many of its government agencies receive federal funding and are part of the D.C. federal budget, which is funded through the appropriations process.

4. Economic and Social Consequences of Government Shutdowns

Contracting opportunities through federal acquisition and assistance accounts often have substantial sums invested. They account for billions in expenditures previously funded by Congress, and workers expect for work to continue without disruption. Public and financial market reaction associated with prolonged debates and impasses can further affect economic performance and growth. If the public perceives Congress as unable to take actions to resolve complex and conflicting policy challenges, it may decrease consumer or business confidence, discount the ability to plan or direct outcomes, and reduce willingness to accept public credit risk. Such views can influence a range of other public priorities, including potential foreign participant desires to hold U.S. debt, to gracefully compete in international financial markets, or to invest in U.S. business activities.

Using employment forecasts, the Council of Economic Advisers (CEA) estimated the consequences of the 5-week federal funding lapse from October 1 to October 17, 2013, on fourth-quarter real GDP growth. It calculated that the shutdown reduced real GDP growth by 0.25 percentage point in the fourth quarter but concluded that the drop in federal spending during the shutdown would likely only result in partial spending growth. Disruptions in private expenditures and investments in national parks, national monuments, and recreational facilities as a result of related closings were factored into the reduction. Impact estimates into paid work hours and wages were developed using BLS data. Nonprime contractors, who provide a variety of government services, experienced abrupt revenue reductions and lifelong service firms had to invest time and resources to file for unemployment compensation on behalf of furloughed contract workers. Small business owners, particularly those in defined shutdown industry sectors and in proximity to a federal facility, reported revenue losses. The Congressional Research Service (CRS) reported that even a brief interruption in education training or research could affect the services rendered, quality, and outcomes. This not only has negative societal costs in education goal attainment but also directly impacts research grants and activities. Furloughing IRS workers and delaying tax return processing at the peak of tax season may have critically impaired the timely receipt of refundable consumer tax benefits.

Consequences of government shutdowns affect a variety of parties and intensify as the length of the funding gap grows. For individuals and families who depend on federal employee salaries and spending in and around federal facilities, a federal shutdown can reduce income and be disruptive. For businesses that derive income from providing services, products, or rental properties serving federal employees and the general public, sales and income are reduced from declining demand. State and local governments similarly experience negative effects. They may extend assistance and claim lost income tax receipts or reduced sales and property tax receipts. Affected employees’ benefits may be reduced, delayed, or require additional action to receive. Those that do not work during a shutdown, sometimes excepted for specific work functions, may receive retroactive pay for the time not worked, as Congress has taken such action after previous funding gaps. Furloughed employees required to work are legally prohibited from refusing to work under such conditions, but failure to pay them promptly for work performed may violate labor laws or the Fair Labor Standards Act.

5. Strategies for Preventing and Mitigating Future Shutdowns

Fifth, making shutdowns less convenient for either or both major political parties might prompt changes to prevent them from occurring. A number of changes might be considered along these lines. Among these could be: disciplining an individual House member introducing a funding bill to make a political point by not paying House members during a funding gap, requiring Members to be in session or on the grounds of the Capitol during a funding gap, changing the two-thirds vote tradition in the Senate so Senate leaders cannot work around the two-thirds vote, and rescheduling the start of each Congress. The procedures for handling continuing resolutions also could be improved to discourage inaction on appropriation bills. Finally, a few other changes could also make the possibility of a shutdown less appealing to policymakers. They include requirements that voided pay will not be reimbursed, and that shutdown costs will no longer be reimbursable. With any change, policy solutions must strike a careful balance during consideration of government shutdowns.

These strategies fall into two categories: (1) ways to remove fiscal decisions from the scope of shutdowns, and (2) ways to prevent some or all aspects of future shutdowns or improve procedures. First, the government should allow automatic extensions of the prior period’s payment levels for both upper and lower limits of spending decisions not made by the beginning of the fiscal year. Second, Congress should also reinstate a bill from the 95th Congress, which specifies that all work essential for constitutional government would be conducted during a funding gap. This would quickly lead to a resolution and a full spending authorization. Third, Congress should require advance appropriations for a defined core of nondefense discretionary spending. Fourth, Congress should revoke the executive branch’s authority to furlough for lack of funding those whose work is essential for constitutional government.