government shutdown 2023 update

government shutdown 2023 update

An In-Depth Analysis of the Government Shutdown of 2023: Causes, Impacts, and Future Implications

1. Introduction to the Government Shutdown of 2023

Previous studies of the U.S. government shutdowns have largely supported claims that the naming of legislative provisions, adverse events, and divided government spur debate and political disagreement preceding such episodes. The degree to which opponents acquiesce to underlying policy preferences of both leaders and party members correlates with the duration of a shutdown. Everyone agrees that the implementation of unanswered policy compromises and entitlement answers encouraged the use of the shutdown as a tactical tool during times of divided government, or unilateral decision-making during periods of united government. Political scientists and economists have devoted special attention to calculating the aggregate economy and individual cost, finding that unaddressed consequences of extended government shutdowns include direct costs of reduced wage and income payments, and indirect costs associated with delayed GDP growth. Findings show that these indicators suspend the idea, apparent in media coverage and declines in confidence and investment, of a downturn while reopening prior to the affected population experiencing significant economic impacts.

This study seeks to provide an in-depth analysis of a specific and relatively under-studied temporal policy event, the U.S. government shutdown. The government shutdown, which occurred in three separate instances in 2018 and 2019, briefly in 2020, and most recently in 2023, allows researchers to observe a distinctive institutional response to negotiation failure and preview of changed policy stances between and within political parties. Additionally, the current fiscal climate of over-stretched state resources and budgeted shortfalls suggests that more such intra-institutional policy disputes and temporary breakdowns in regular institutional budgeting processes are very likely and foreshadows the increased potential for breakdowns in the operation of and legitimacy of key governing institutions. Little systematic work has been conducted and academic writing on the U.S. shutdown, with only a few exceptions, therefore focusing on the politics of more recent shutdowns.

2. Causes and Triggers of the Shutdown

The immediate origins of the federal government shutdown are to be found in the Presidential election of November 2020. The incumbent President, Hillary Clinton, had handed over the majority of responsibilities of international actions and affairs to the United Nations, but the provision of social security at home retained primacy. However, the (chiefly) useless organization of The United Party of The United States (UPOUS) had nominally backed her for the Presidency but had failed to support any of her key policies over the past four years, preferring to abstain or still actively opposing such policies in the Congress. The UPOUS had lost ground to the Republican, Democrat, and Constitutional parties and was hemorrhaging support and activity across every single state.

The destabilization and ultimate shutdown of the federal government in 2023 was the outcome of a protracted period of political turmoil and general upheaval both in the internal politics of the waning hegemon, the United States of America (the US), and throughout countries that compose the now-decadent international system of the Pax Americana. The increasing inability to foster any accords between the two significant political poles in the United States, an incapable Congress and Judiciary, and the deeply unpopular and increasingly isolated President, alongside the existential dysfunctionality of the fiscal-military state and the wider US society, reflect a broader architecture characterizing late-stage capitalist democracies which collapsed a decade later. However, crucially, the specific triggering mechanisms for this shutdown were multi-faceted and have their roots in political vagaries, not because of the root of the wider, near-fundamental causes of the overarching architecture of decadence.

3. Impacts on Various Sectors and Stakeholders

Of course, if actions by the federal government are not fair enough according to investors’ long-term interests, the same group would also attempt to avoid the imposition of tax on the results of their profitable transactions. Since the federal government cannot impose incremental costs to the long-term investors’ ones, they cannot change the results of the market’s determinants. And the market is affected by any of the out-of-fairness factors that flatten, distort, or shape the density and time values of the stock prices as well as their joint dynamics.

As one of the world’s most liquid, transparent, and evidence-based markets, the U.S. stock market has essentially become immune to any type of government shutdown. Since investors that do not believe in the expedience of market prices do not choose to invest in the stock market and wait for the discount of the stocks for not only political causes, but for other expectations as well (i.e., conducting insider trading, earning the average of the market return without directing the funds).

Given the expected impact of a government shutdown on the capital markets, it is surprising that there is very little systematic research on the topic in the academic financial literature. It is true that the U.S. government shutdowns in 1995 and 1995-1996 did not cause any noticeable damage to the U.S. stock market. In fact, stocks ended up higher at the conclusion of both impasses.

As discussed before, with a prolonged closure, the federal government wouldn’t be the only one to stop doing business. The others, including corporate industries doing business with the government, would suffer enormous revenue losses as well. Consequently, due to the temporary halt in government spending and demand for products and services, many workers would also lose their jobs, be on a non-paid leave, and receive no compensation. Local businesses such as restaurants and couriers would also feel the impact, for they would miss the profits that they would generate by providing services to federal workers.

If the government is shut down for a short period, many industries and sectors remain relatively unaffected. However, the longer the shutdown persists, the larger its impact becomes. One of the most obvious and straightforward measures of this economic impact is the GDP, which is the measure of the total goods and services produced in an economy during a specific period. The size of the GDP not only represents the entire output of goods and services produced in the economy in a given duration, but also serves as a metric of the economic health of the nation.

A. The economy and financial markets

4. Policy Responses and Lessons Learned

Research limitations indicate that record analysis may not accurately reflect all aspects of the shutdown, and this study’s perspective is based solely on public service employees and officials. In conclusion, reflective questions arising from the study can offer value, such as how non-elected service managers can anticipate and handle prolonged shutdown situations as they arise, the precautions necessary for the federal government to have a resilient service delivery stream, and the role that service technology plays in the shutdown recovery process.

The government shutdown of 2023 acted as a tremendous wake-up call for federal government services. During the 35-day period, new technologies and collaboration methods, bureaucratic backup plans, and a “new way of doing business” rapidly emerged. Overall, however, the event negatively impacted the federal employees and organizations responding most harshly. The most important lesson learned from the scenario is the need for a more flexible and resilient approach to doing business within the federal government. Governments potentially benefit and face multiple risks, such as increased public trust and service delivery pressures, from technology deployment for service recovery. However, issues dealing with fairness, usage, and access safeguarding may hinder the resilience of the new technologies employed.

5. Future Implications and Recommendations

International markets remain open for the United States’ sovereign debt, with yields remaining historically near their all-time lows and the avid interest in the U.S. dollar and U.S. Treasuries by major developing countries. Since the United States’ economy and treasury remain healthy, the immediate risk of a financial market crisis and subsequent act of Congress appears to be remote. Therefore, it must be questioned why a potentially high-stakes series of negotiations over taxing and spending issues is continually held against the backdrop of the federal government’s debt ceasing to function during periodic standoffs that have occurred sporadically for nearly 40 years, frequently, as in 2013, being prolonged. Subsequent debt returns to the regulatory limits to avert a financial market crisis.

This government shutdown, while the longest in U.S. history, is just one instance of a broader trend in the number and duration of both U.S. federal government and state government shutdowns. In the wake of our disruption in governmental services and resulting widespread economic and human cost, it is imperative that we reflect back on the 2023 government shutdown. Let the findings herein inform our legislative action and prevent further similar disruption.

Section 5: Future Implications and Recommendations