government shutdown deadline

government shutdown deadline

The Implications of Government Shutdown Deadlines: A Comprehensive Analysis

1. Introduction to Government Shutdowns

Clearly, the utilization of a principal-agent model, in which a single-period model, the general properties of the model and the application of the theory are introduced, is a cornerstone to this study. According to principles, while forming the model, the analytical consequences of a signature game namely a strike threat game, in which a threat-function of two players, The U.S. President and the joint legislative institutions, incurs distinct costs, are discussed. Moreover, compared to other conventional models in the literature, it leads to more interesting, analytically richer and more realistic results that distinct from time-in-service wage schedules, the model parameters are linked in a more general form. This is because we may assume the existence of discretionary government shutdowns since it can be more beneficial, by using the aforementioned principle, the U.S. government to the interests she serves, beforehand. Therefore, even though she has the opportunity to announce a wage schedule, this does not represent the best strategy in practice.

Government shutdowns are the automatic burden of not having political agreement for budgeting procedures. Such a fact limits the capacity of economic growth and development, as well as stalling society’s improvement due to job losses and finding a rational solution for it. The main aim of this dissertation is showing that an exogenous government shutdown can significantly slow down economic growth and general welfare in a government shutdown effect. The focus of this study is to investigate the macroeconomic effects of determined government budget manipulation to forecast automatic government shutdowns, which have not been discussed in earlier literature due to the capacity constraints of changes in the political institutions. Distinct from economic analysis in the literature, there will be a periodical government shutdown both in the model and the data.

2. Historical Background and Causes of Government Shutdowns

Economic and political models have implications for both the era in combination with the circumstances that trigger government shutdowns. Economic models of the shutdown will focus, for example, on the benefits and costs the President and Congress line up against each other. The benefits are those of a budget that is within reasonable approximation of the budget that we would obtain were the Congress and President to place all of their collective decision-making proclivities at work on a budget and not shut the government down.

There have been 18 shutdowns of the federal government since 1977. These have ranged in duration from one to 21 days. There are various causes of these, including poor relations between members of Congress and the President where decision-making is concerned. Budgetary economics, including dramatic increases in the federal budget, contributed to these as well. In addition to these two major problems are structural defects that relate to the government’s decision-making processes for important policies in such areas as defense, foreign relations, agriculture, and other policies that are important for the general welfare.

3. Economic and Social Impact of Government Shutdowns

When a federal agency ceases its operations—especially large agencies such as the Environmental Protection Agency, Department of Labor, and the Commerce Department—many employees are furloughed. Small and medium businesses that sell services or products to the government have the most immediate need for assistance. Large companies may have the financial resources to continue operations by cutting costs and reducing staff in the markets they supply to the federal government and require loans only to meet their contractual back payments. But small and medium suppliers often require the loan to keep the business afloat. The most common forms of assistance for affected businesses are lines of credit through the Small Business Administration (SBA), the Business Disaster Loan Program, and the Small Business Administration’s Economic Injury Disaster Loan Program. The SBA is more than willing to help, although the beneficiaries feel like they are the only small businesses in the country since most are unfamiliar with assistance that the SBA may offer.

The most important issue posed by potential government shutdowns concerns the potential social implications. When the federal government is unable to fulfill its obligations (either during a long-term lapse in appropriations or through furloughs of a substantial number of workers), many questions arise regarding the ability of employees to make ends meet, the consequences of many agencies operating at greatly reduced levels, public confidence in government, and the methods employers currently use to spread employment disruptions across a larger number of employees. With real GDP growing at a 4.8% annual rate in the fourth quarter of 1995 and employment rising at an average annual pace of 2.3% during the first two quarters of 1996 (in both civilian and nonfarm payrolls), many individuals doubt that agency shutdowns had an economic impact. Even so, extended shutdowns pose daunting economic challenges.

4. Strategies for Preventing and Mitigating Government Shutdowns

The first two approaches for averting or mitigating government shutdowns are pretty straightforward, at least conceptually. The third can take several forms. In one case, a “clean” continuing resolution is approved, extending the funding of all, some or only a single appropriations act without conditions for an agreed-upon period of time while additional time is sought to work through remaining differences between the parties and the two chambers or the administration. In another, a measure providing for a temporary, targeted increase or suspension of the federal debt limit and perhaps also making other policy changes is included in an appropriations bill, a CR, or some other legislation, such as a surface transportation or a tax measure, to provide an additional stake in the negotiations and the additional time to reach consensus not already possessed by those other measures in advance of the shutdown deadline. Finally, policymakers can reform or perhaps even repeal the various mechanisms such as the statutory pay-as-you-go (PAYGO) requirements that together lead to the shutdown and, despite statements to the contrary, still often are critical to moving the policy process and passing fiscal law.

Given the implications of government shutdowns and the pressures often associated with them, what strategies are available for lawmakers to either avert a shutdown or, if it does occur, to mitigate the consequences? Essentially, there are four generic approaches lawmakers can pursue: 1) continue the aphorism “it takes a deadline to make a decision,” thereby using the impending shutdown deadline as additional leverage to help secure a decision on pressing public policy concerns before the start of the fiscal year; 2) pass full-year appropriations acts covering all discretionary spending in one or more bundles or as one bill just before or on the first day of the new fiscal year; 3) approve one or more interim or “bridge” continuing resolutions between the end of the fiscal year and the enactment of regular appropriations, thereby buying additional time to negotiate full-year funding bills; or 4) adopt new mechanisms and procedures to prevent an impasse over fiscal policy from leading to a government shutdown.

5. Conclusion and Recommendations for Future Policies

Given that government shutdowns have become a predictable recurring threat due to deadline scheduling of controlling appropriations expiration, and not just another source of funding gap, the passage of an automatic continuing resolution should no longer be treated as the focal point of negotiations. In the future, lawmakers need to focus on ways to design deadlines that bear a more proportional relationship to the substance of law due to sunset. McCarthy describes several reforms that Congress has implemented over the years to eliminate serial crisis deadlines (short-term extensions of the debt ceiling, curbing the number of major laws that sunset) within these cliff threat situations.

Over the past two decades, deadlines associated with shutting down the U.S. federal government have had a destructive impact on Congress’ ability to legislate effectively pending law expiration. Our comprehensive evidence, showing how the distributional implications of deadlines contribute to legislative gridlock, speaks to the worsening prospects of legislating that affects federal rents and inconclusive findings in the literature. It also provides a more fine-grained understanding of the difficulties of peripheral issue gridlock, or perhaps better “everything but the kitchen sink gridlock” that apply not only to the period from 1969 to 1999—when the Senate was “reformed”—but also to the modern period well after the Senate was “returned” to its origins. While our results are silent on how to go about addressing the implications of government shutdowns for Congress’ ability to govern, there are lessons to be learned from their distributional implications.