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A Federal Shutdown Could Have Dire Consequences

Almost 800,000 federal workers will join the ranks of the unemployed in the event of a shutdown. Members of Congress, however, will continue to be paid.

As a Democrat, I confess that I am not overjoyed with Obama. Sure, I would have been appalled if Romney had won. However, I did not vote for Obama to have him fail to defend the principles on which he ran: social justice such as health care, unemployment relief, food stamps, the redistribution of the tax burden, education and immigration reform, etc. He also ran on the proposition that the national debt should be reduced. To let the Tea Party succeed in holding hostage the country with threats of fiscal cliffs or other self-inflicted financial calamities because Republicans are in fear of being attacked from the right is simply to surrender his agenda to nincompoops. In short, Obama has allowed the idiots to run the asylum. 

We are now heading for the next installment of this soap opera. The nincompoops are threatening to shut down the federal government if Obama does not curb federal spending in various unspecified areas. The official Republican policy seems to be to call Obama bad names because he has not told them what cuts he is prepared to make. It would seem, however, that those demanding cuts should take the lead in specifying which ones should be made. Also, it is generally speaking true that Congress has authorized almost all the spending by the administration.

There is a simple solution to reducing the debt: improve the economy. If the recession ends, there will be at least two fiscal results: a strong economy will greatly increase tax revenues and there will be less need for social services. This has always been the case in America. In good times, the debt is reduced.

What actually happens if the nincompoops succeed in shutting the government down? First, we are talking about a shutdown of the federal government; presumably, state governments will continue to function at least as long as their money doesn’t run out due to the failure of the federal government to reimburse them as it now does for some services. Second, almost immediately 800,000 federal workers will join the ranks of the unemployed. Under federal law, they cannot even work voluntarily. Indeed, they are to turn in their Blackberries and the like so that they can’t communicate with one another. Third, agencies like the Department of Education, the Commerce Department, the National Park Service and a myriad of other federal services will be cut down. Federally supported zoos, museums and the like will have to close. (Whether the animals in the National Zoo in Washington, D.C. could be fed is an open question.) Regulation of the stock market will all but cease and the issuing of new securities will not occur because there will be no one around to check them before they are traded. 

The actual test for federal employees is whether they are deemed essential or not. Thus the military, the border patrol, the Coast Guard and those involved in safety, such as air traffic controllers and airplane inspectors, and even the widely beloved (?) people who pat you down at the gate will still be working. The fact that one is in this category does not necessarily mean that payment will be received on schedule. The military, for example, will be half way through a pay cycle if the shutdown happens on schedule. Their checks for this period will probably be a week delayed. Moreover, if the shutdown were to continue, there is a chance they would not be paid because there is no one around to pay them.

Some of what we think of as federal government functions will continue because they are not actually funded by the feds. For example, Medicare will continue because it is directly funded by payroll deductions, as will Social Security. The unemployed, whenever their federal unemployment insurance runs out, will have to rely on their state of residence for relief or, more likely, the Salvation Army and the like.

There are at least two special cases: the Congress and the post office. As to Congress, members (and their staffs, if the members deem them “essential”) will continue to be paid, although it will probably amount to political suicide for them to cash their checks during a shutdown that Congress itself has brought about.  

The post office is, of course, funded (if you can call it that) by the sale of stamps. For years now the post office has been bleeding money, not because of any inefficiency but rather because Congress has imposed devastating pension requirements on it and controlled how it operates, including its hours of operation and the price of its services. FedEx and UPS would be out of business in a flash if they were controlled the same way. While a relief bill passed the Senate some time ago, the House has never been able to get its act together. Alas, quite independent of the shutdown, these “swift couriers” will be stayed before the end of the year.

Tea anyone?

Andrew Wilt January 11, 2013 at 06:16 PM
John Csellak - What you wrote may be true, but in the end it is very obvious that the US government's expenditures far outweigh its revenue or the ability to borrow more. Can we agree on that?
John Csellak January 11, 2013 at 06:35 PM
No argument, Andrew. And no government can keep increasing it's debt faster than the economy grows forever. We do need to reduce the deficit. Some of that will happen by itself as the economy continues to recover. It's already happening, in fact. But that's not going to be enough, so some difficult decisions an choices are going to have to be made. My big concern is about the debt ceiling. Not raising that would be an absolute economic disaster and shouldn't even be considered. I hate the idea of a government shutdown, and that's damaging, too, but it's orders of magnitude less than a debt default. And unforutnately it's a "normal" bargaining ploy in DC.
Tony January 11, 2013 at 07:48 PM
about $2 billion a week goes to rebuild other countries such as Afganistan. But nope....the house GOP wants to start cuts here for Americans...and continue to give to non-Americans....yep...that makes sense
Andrew Wilt January 11, 2013 at 08:05 PM
John Csellak - I am not advocating a debt default, but, raising the debt ceiling is just prolonging the inevitable, and everyone knows it. Don't forget that the US lost its AAA credit rating. I don't have a suggestion as to what to do, but Washington must change its ways. Maybe the economy is genuinely improving, maybe it's not. It's difficult to really tell as the Fed continues to pump $40 billion a month into the markets.
Joe Sommers January 12, 2013 at 10:35 PM
Tony...Unsustainable entitlment spending is the problem Tony... 88 Million entitlement takers to 109 million wealth producers. The math doesnt work Tony. Your Reagan arguement doesnt hold water because there were many more wage earners then entitlment takers back in those years.

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