What a Government Shutdown Could Look Like

It could be said that in this last week of the government’s fiscal year, the unstoppable force of House Republicans is meeting the immovable object of Senate Democrats. Although it may not be quite a fait accompli yet, the likelihood of a government shutdown seems be getting higher each day with no annual spending bills yet passed by Congress and enacted. If a shutdown does occur on Oct. 1 (or at some later point due to a mini-interim spending bill postponing it), what would it look like and how would it affect Americans?

It is impossible to answer these questions in advance with absolute certainty, but the shutdowns in fiscal year 1996 and earlier budget showdowns are useful precedents in trying to understand what might happen starting next week.

This Time Around, Far More Government Workers Could Be Affected

In the two shutdowns in fiscal year 1996 (the federal fiscal year starts on October 1), at least some appropriations bills had been enacted, which meant that substantial parts of the government were not affected, especially the second time around. Currently, no spending bills have been enacted yet.

The first shutdown was Nov. 13-19, 1995. When that five-day shutdown began, three of 13 appropriations bills had been enacted: the Military Construction Appropriations Act; the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Act; and the Energy and Water Development Appropriations Act. Thus, some parts of the government were funded. Approximately 800,000 federal employees were furloughed.

The second shutdown lasted 21 days from Dec. 15, 1995 through Jan. 6, 1996. Four additional spending bills had been enacted by then – thus, seven out of thirteen appropriations bills were in effect, funding parts of the government, including the mammoth Defense Department. The four additional bills were: the Department of Transportation and Related Agencies Appropriations Act; the Treasury, Postal Service, and General Government Appropriations Act; the Legislative Branch Appropriations Act; and the Department of Defense Appropriations Act. The number of furloughed federal workers correspondingly dropped to 284,000.

In sum, if there is a government shutdown next week, far more government employees could be affected this time around.

Some Impacts from the Fiscal Year 1996 Shutdowns

Examples of impacts from the two shutdowns that occurred at the beginning of fiscal year 1996 were detailed in a Congressional Research Service report this August:

  • “American Veterans. Multiple services were curtailed, ranging from health and welfare to finance and travel.”

  • “Health. New patients were not accepted into clinical research at the National Institutes of Health (NIH) clinical center; the Centers for Disease Control and Prevention ceased disease surveillance; and hotline calls to NIH concerning diseases were not answered.”

  • “Law Enforcement and Public Safety. Delays occurred in the processing of alcohol, tobacco, firearms, and explosives applications by the Bureau of Alcohol, Tobacco, and Firearms; work on more than 3,500 bankruptcy cases reportedly was suspended; cancellation of the recruitment and testing of federal law enforcement officials reportedly occurred, including the hiring of 400 border patrol agents; and delinquent child-support cases were delayed.”

  • “Parks, Museums, and Monuments. Closure of 368 National Park Service sites (loss of 7 million visitors) reportedly occurred, with loss of tourism revenues to local communities; and closure of national museums and monuments (reportedly with an estimated loss of 2 million visitors) occurred.”

  • “Visas and Passports. Approximately 20,000-30,000 applications by foreigners for visas reportedly went unprocessed each day; 200,000 U.S. applications for passports reportedly went unprocessed; and U.S. tourist industries and airlines reportedly sustained millions of dollars in losses.”

The White House in 1996 estimated that the shutdown-related expenses in FY 1996 cost over $1.4 billion in then-year dollars (see page 268). This probably is an underestimate, according to an analysis by Roy T. Meyers, a professor of political science at the University of Maryland, Baltimore County. Agencies have to devote time and attention to preparing for a shutdown, as opposing to executing their missions normally; there are additional security costs; there are inefficiencies and bottlenecks that occur when large parts of the workforce are furloughed; etc.

“Republicans who are so big on uncertainty and government efficiency would never think it’s prudent to ask a business to operate the way they’re asking government to operate,” Stan Collender, a budget expert who used to work on the House and Senate budget committees, told The Washington Post. “Can you imagine a business telling employees, ‘We might shut down, and keep an eye out for an e-mail telling you whether to report next week?’”

These impacts do not factor in the effects on business confidence. The Washington Post’s Wonkblog examined the impact from the fiscal brinksmanship in 2011:

During the 2011 government shutdown debate, Gallup’s Economic Confidence Index tumbled 24 points. It rebounded after the deal was reached, but then fell 30 points during the debt-ceiling debate.

Any economist will tell you that part of the reason the economy hasn't recovered more quickly and that consumers and businesses aren’t spending is that they’re scared.

Variables That Could Affect a Shutdown’s Impact This Fall

There are a lot of variables that impact how a potential shutdown would play out this time around. Some would mitigate its impacts, others would exacerbate them.

How Long It Lasts

A shutdown could last a couple of days, including over the weekend, or it could be prolonged. A hypothetical 30-day shutdown was described in 1981 by federal officials who spoke to the Government Accountability Office as “unthinkable.” A longer shutdown could be extremely disruptive to Americans and would substantially erode the operations of government agencies even after a shutdown ends due to the administrative chaos of handling problems that have built up over the course of the shutdown.

How Broadly "Excepted" Government Positions Are Defined

There is a fair amount of discretion in how the government can define positions and activities as “excepted” or exempted from furloughs. A USA Today analysis of 119 shutdown contingency plans filed in 2011 with the Office of Management and Budget (OMB) estimated that 59 percent of non-defense federal workers would be considered excepted from furloughs (the analysis did not factor in Defense Department employees). However, if the shutdown lasts more than two weeks, according to The Washington Post, the 1.3 million excepted federal civilians and 1.4 million uniformed military personnel would still have to work on a no-pay basis until after the shutdown ends.

Commenting on the number of federal workers who would be considered excepted, “To the extent that agencies are taking advantage of the vague guidance OMB has given them, it doesn't bother me a bit," Meyers, the University of Maryland-Baltimore professor, said. "What the agencies are being told to do (is) an asinine thing.”

Would Non-Excepted Federal Employees Get Paid At All?

It is far from a sure bet that non-excepted federal employees would receive back pay for the time they are furloughed. In past shutdowns, they were retroactively compensated, but the politics in Congress are far less favorable to federal workers this time around.

“If there’s savings to be achieved by not paying [the federal employees] and we’ve got a conservative Congress that says, ‘They didn’t work. Why would we pay them?’ . . . it’s a lot more problematic as to whether precedent would apply this time around,” G. William Hoagland, a former Republican staff director of the Senate Budget Committee, told the Post.

Whether considered excepted or not, the 4.4 million or so federal employees (including military personnel) and their spouses and children would be affected. How will they pay for rent, for groceries, for their cars and other bills, etc.? The impacts will be much greater if the shutdown is a long one.

“We think we have a very strong case to make that we are total victims of the standoff in Congress,” Jacqueline Simon, public policy director at the American Federation of Government Employees, told the Post. She said the union plans a “huge grass-roots political mobilization” to fight for back pay if there is a shutdown.

A Long-Term Shutdown Might Impact Administration of Mandatory Programs

Social Security and other types of federal benefits authorized by mandatory spending could continue, although the administrative expenses are paid for by discretionary spending, potentially creating havoc if a shutdown is prolonged. As the second FY 1996 shutdown continued, at the Social Security Administration there were “increasing difficulties in administering the agency’s entitlement programs,” according to the Congressional Research Service.

One example of the growing administrative challenges: Claims processing fell behind and a backlog grew. According to a Social Security Administration history, “If processing was not accomplished timely, the accuracy and reliability of SSA claims processing would be seriously compromised and a permanent disruption of SSA’s ability to administer the trust funds would occur.” Even after the shutdown ended, it took time for the Social Security Administration to get the issue under control:

The shutdown had a devastating effect on the Agency and, in particular, the 11,000 employees who were deemed non-essential.  During the shutdown, the work piled up in the offices, and when employees returned to work, they felt pressure to reduce the backlogs.  The furlough was followed by a major snowstorm in January 1996, which closed many Federal offices in the Baltimore-Washington area for three days.  This resulted in even further backlogs, which took several months for the Agency to reduce.

A Shutdown Would Not Stop the Affordable Care Act

Also known as Obamacare, the Patient Protection and Affordable Care Act (ACA) would still go into effect on Oct. 1 because mandatory funding available, some discretionary money is available for implementation, and “it seems likely that the Administration will continue to rely on alternative sources of funding to support ACA implementation activities,” according to the Congressional Research Service in response to a request by Sen. Tom Coburn (R-OK).

What Could Stop a Government Shutdown

Congress could pass a continuing resolution that would continue to fund the government without provisions to defund the ACA, which is at the heart of the current gridlock over funding the government. There is no compelling economic, fiscal, or other public policy reasons to cut any part of the federal budget now – the discretionary budget has already been substantially reduced in recent years and is on track to being the smallest it has been in decades as a portion of the economy. Federal workers have already seen several years of pay freezes, and many were furloughed this year without pay. If anything, the weak economic state of the United States should point to maintaining and even increasing federal spending to boost the economy until it hits stride again.

Coming next: Analyzing a potential shutdown's impacts to government contractors...

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