A government shutdown could cost the US economy billions


    In this Dec. 11, 2018, photo, President Donald Trump and Vice President Mike Pence meet with Senate Minority Leader Chuck Schumer, D-N.Y., and House Minority Leader Nancy Pelosi, D-Calif., in the Oval Office of the White House in Washington. (AP Photo/Evan Vucci)

    Neither the White House or Congress have indicated they're willing to budge on border security funding, making a Christmastime shutdown of about one-quarter of the federal government more likely.

    President Donald Trump took ownership of the pending shutdown during a raucous Oval Office meeting with House and Senate Democratic leaders last week, saying he was "proud" to shut down the government if Congress does not fund a wall along the U.S.-Mexico border. Democrats have offered a maximum $1.3 billion for border security, not border wall and Trump has refused to settle for less than $5 billion.

    Over the weekend, White House adviser Stephen Miller reiterated that position saying the president will "absolutely" shut down the government if it comes down to the issue of funding the border wall.

    "We're going to do whatever is necessary to build the border wall to stop this ongoing crisis of illegal immigration," Miller said in an interview with CBS' "Face the Nation."

    Senate Minority Leader Chuck Schumer, D-N.Y., was equally immovable telling told NBC's "Meet the Press" Sunday that Trump "is not going to get the wall in any form." Trump needs at least nine Senate Democrats and every Republican to approve the funding measure and avert a shutdown.

    Previous experience suggests government shutdown fights produce political winners and losers but the price for U.S. taxpayers and the economy is always high. Depending on whether it happens and how long it lasts, an end of the year shutdown could cost millions in lost productivity and billions in downstream economic effects.

    That's the bad news. The good news (if you're grading on a curve) is that Congress has already passed appropriations covering about 75 percent of government spending. So, if the government shuts down it will be only partial.

    The parts of the government that will be affected are the Departments of Agriculture, Commerce, Housing and Urban Development, Justice, State, Transportation, Treasury, and, of course, the Department of Homeland Security, with jurisdiction over border security and the border wall. Independent agencies will also be shuttered including NASA, the Food and Drug Administration and the Environmental Protection Agency.

    "Shutting down the government is a costly way to engage in a fight," explained Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. "The two parties battling things out shouldn't cost taxpayers real money and it does. We're footing the bill for work that never got done."

    If Congress and the White House fail to pass a spending bill by Friday, approximately 380,000 non-essential federal workers will be sent home without pay. Those furloughed employees are typically reimbursed by Congress after the shutdown ends. Essential government personnel will continue working through the shutdown, or about 420,000 employees associated with critical safety or security functions.

    Regional economies with a high proportion of federal government employees, like the Washington D.C., Northern Virginia, Maryland area, suffer disproportionate economic losses when the federal government closes its doors.

    "Unless Congress decides to reimburse them, federal employees are going to get coal in their stockings because they're not going to be paid," said Frank Shafroth the director of the Center for State and Local Leadership at George Mason University.

    The ripple effects of government shutdowns are felt throughout the country. Roughly 30 percent of states' revenues come from federal grants and aid. When the government closes its doors, county and city governments are still obligated to keep community programs going, Shafroth explained, particularly around the holidays.

    "Local governments don't have the option of closing down," he said, which means the burden of providing services shifts from the federal government to the states, who are not necessarily repaid. "So, in the end, it's local taxpayers and state taxpayers who will end up paying the brunt of what the president has proposed."

    PREVIOUS TRUMP SHUTDOWNS

    In late 2017, analysts projected a government shutdown would cost the U.S. economy $6.5 billion per week. Standard & Poor's came up with the estimate in a report titled, "With a U.S. Government Shutdown, There Will Be Blood."

    On top of the direct costs of stopping and restarting government programs, lost productivity and reimbursing furloughed federal workers, S&P noted the ripple effects would tear into private sector spending, earnings and job creation. The timing, about one week before the end of the fourth quarter, created another nightmare scenario. Investors would be rattled and the economy would not have enough time to bounce back before the end of the fourth quarter and the result was projected to be a 0.2 percent quarterly loss of GDP.

    Ultimately, the shutdown, set for midnight, Dec. 22, 2017 was averted—temporarily. By the start of the new year, Congress and the White House had not worked out their differences, resulting in a 3-day shutdown from Saturday, Jan. 20 through Tuesday, Jan. 23.

    The issue then as now was funding for the border wall. Also at stake, the fate of "Dreamers," the nearly 1 million immigrants brought to the country illegally as children and shielded from deportation by the Deferred Action for Childhood Arrivals (DACA) program. Democrats eventually yielded and appropriated $1.6 billion for border security, but only $38 million for a wall.

    A second government shutdown took place a few weeks later on Feb. 9. Congress and the White House reached an agreement to fund the government and move ahead with a massive $1.3 trillion two-year budget agreement. Republican Sen. Rand Paul of Kentucky railed against the spending increases and filibustered past the midnight deadline resulting in a short-lived shutdown.

    A poll taken before the Jan. 2018 shutdown showed a plurality of Americans (48 percent) blamed Trump and the Republicans. Only 28 percent faulted Democrats while 18 percent said both sides are equally responsible. Anothe poll taken after Congress failed to fund the government showed 39 percent of respondents blaming Democrats compared to 38 percent who said it was Trump's fault.

    In the leadup to a possible Christmastime shutdown, a USA Today/Suffolk University poll found 43 percent of voters said they would blame Trump and the Republicans. Twenty-four percent said they would hold Democrats responsible.

    Trump didn't lose much support among his base earlier this year and recent polls suggest they will stick by his side if he shuts down the government over the border wall funding. While Democrats were overwhelmingly against the idea (83 percent opposed), two-thirds of Republicans said they support Trump's shutdown.

    TOP 3 SHUTDOWNS

    The three longest government shutdowns occurred under Democratic Presidents Jimmy Carter, Bill Clinton and Barack Obama.

    The Clinton shutdown was the longest. It lasted 21 days from Dec. 5, 1995, to Jan. 6, 1996 and came just a month after another five-day shutdown. The shutdown was the result of a budget impasse between the Democratic president and Republican House Speaker Newt Gingrich. The end results was a multi-year plan for a balanced budget, which was achieved with a surplus by 1998.

    According to the Office of Management and Budget, the two shutdowns in 1995 and 1996 cost over $1.4 billion, which translates into more than $2.24 billion adjusted for inflation.

    The 1978 shutdown under Carter was the second longest and lasted 18 days. It was one of five during his administration which resulted in 57 days of shutdown. Ronald Reagan had the highest number of shutdowns, eight during his two terms, but the government was only closed for 14 days total.

    The 2013 shutdown under Obama lasted 16 days, starting midnight Oct. 1 and ending ended Oct. 17. The 16-day lapse in funding was the result of a partisan showdown over the Affordable Care Act, or Obamacare. Then-freshman Senator Ted Cruz, R-Texas, helped launch the shutdown with a filibuster and 21-hour speech, which included his recitation of Dr. Suess' "Green Eggs and Ham" on the Senate floor, a first for that august body.

    According to the Office of Management and Budget, the 2013 shutdown cost approximately $2 billion in lost productivity. Standard & Poor's said the cumulative costs to the economy as a whole carried a price tag of $24 billion. That included lost government services, lost travel spending, lost revenue due to National Park closures and approximately $217 per day in lost wages for federal contractors.

    OPTIONS FOR AVERTING ANOTHER SHUTDOWN

    Outside of the White House, there is hardly anyone in Washington, Democrat or Republican, who believes a border wall is worth the cost and disruption of not funding the federal government.

    "One thing I think is pretty clear no matter who precipitates the government shutdown is the American people don’t like it," Senate Majority Leader Mitch McConnell., R-Ky., told reporters last week.

    During the White House meeting, both Schumer and Democratic House Leader Nancy Pelosi said they wanted to keep the government running. Branding it a "Trump shutdown," Pelosi argued that "a shutdown is not worth anything."

    Following the meeting, the House Speaker-designate offered an ultimatum. Congress easily has the votes to pass appropriations for all departments and agencies, she said. The one exception is the Department of Homeland Security. Pelosi offered to fund DHS at 2018 levels through Sept. 30, the end of the 2019 fiscal year. The White House has not signaled openness to the proposal, continuing to insist on $5 billion or bust.

    If the two sides are unable to reach an agreement, it will mark the third shutdown in one year and a worrisome trend in the way the government operates, according to MacGuineas.

    "It's problematic in and of itself but it also shows the levels to which our political leaders will stoop," she said. "Very few of us stomp our feet and go home when we don't get exactly what we want at work. There is something wrong with the system when that's how our political leaders behave more and more regularly."

    If Congress does not pass a spending bill Friday, they may have to cut short their year-end recess and return to Washington for Christmas or New Year's. President Trump is scheduled to be at his Mar-A-Lago resort in Palm Springs, Fla. from Dec. 21 through Jan. 6.




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