COSTS OF A US GOVERNMENT SHUTDOWN

In 1981 US Attorney-General; Benjamin Civiletti interpreted the 1884 Anti-deficiency Act stating that in the event of a funding gap, government agencies should suspend operations until Congress appropriated money. The question then beckons why other Countries do not have Government shutdowns.

In a parliamentary system that is almost impossible, as government without money cannot supply the honey to function. Theoretically, many countries do not even need a working government. Both Netherlands and Belgium operated without a government between 200-500 days respectively however during this time both nations operated with business as usual. So why is it so important for the effects of a US Government shutdown to be taken so seriously?

Unlike 2013 shutdown where the issues where much more linear in government funding, in 2018, the situation is a combination of polarized and politicized issues.  

THE REAL REASONS

The Deferred Action for Childhood Arrivals (DACA) nicknamed “Dreamers” was an American immigration policy that allowed a group of individuals entering the US when they were minors, and had either entered or remained in the country illegally, to receive a renewable two-year period of deferred action from deportation and to be eligible for work.  This program came under immense scrutiny when in September 2017 the new Trump Administrations wanted to end it. US Congress however wanted to extend the time to March 2018. For both the Democrats and Republicans in the House of Representatives this is an issue where some districts have or are consisting of such constituents, which is why many Congressional Representatives wanted a fix to the issue. No state has this as a cornerstone of an issue like the Republican state of Arizona. Many commentators have joked that the Mexican border has developed north in to the state as Arizona houses the largest number of Dreamers. This staunchly Republican state and the narrative circulating around it over immigration has cornered many Republicans within Trump’s own party. Under recommendation from Republican Majority leader Mitch McConnell, President Trump did strike an agreement with Democratic leaders Nancy Pelosi and Charles Schumer that for additional security at the border, the priority of Dream Act maybe sidelined for now. That was not until Immigration hardliners within the President’s staff caused a policy shift; adding further demands for the DACA deal consisting of funding for the Mexico wall and more additions to the legal immigration system. A furious Nancy Pelosi and Charles Schumer responded by making this issue as part of their stand in 2018.

The Children's Health Insurance Program (CHIP) in order to lure Democrats to vote for a stopgap-spending bill without an immigration deal the Republicans attached a six-year CHIP reauthorization while dropping an earlier proposal to pay for the extension with Medicare cuts. The Democrats furiously opposed, furthermore, later it was noted that a long-term extension would be less costly than first believed as new enrollers as if families would be eligible for government subsidies under the Affordable Care Act. Democrats were unconvinced thereby CHIP became an issue of explosive political and verbal exchanges blaming one another for choosing between health care for children and Dreamers.

In December 2017, after the Trump Tax Overhaul passed the Senate with 51 YES to 49 NO votes, Republican lawmakers wanted a Short-term Spending Resolution (SSR) funding until January 19, 2018. Democrats, fed up with not just the present SSR but two previous SSRs was strategically able to galvanize the Republican defense hawks in the House and Senate over the lack of a full-year spending that cripples the Pentagon. The SSR at the basic level worries the Pentagon of each bullet-by-bullet utilization as they seek further funding in their operations and equipment. To mitigate such an issue a small group of House-Republicans unsuccessfully added a full-year spending bill but the Republican Leadership did not approve of it. As a result four Republican Senators refused to vote for SSR continuing resolution undermining any effort to assist the Pentagon or have a united front against the Democrats.  

ABSENCE OF LEADERSHIP

The President in-tweet, Donald Trump has displayed a very unstable negotiating style that has plagued both Republicans and Democrats to find an amicable deal. To add more misery to his conduct his inappropriate and vulgar references to African nations as “shithole countries” and rejecting a bi-partisan DACA proposal caused further havoc within his own party. When the President was much needed by his Republican strategists, he was absent or silent in his tweets. The relationship of the President to his own Congress has become so toxic that at the behest of the Republican Senate leadership; Republicans have begged with utter frustration what would the President like as an agreement only to find that the Commander-in-tweet is “not sure”. Senate Republican, Mitch McConnell mentioned “As soon as we figure out what he is for, then I would be convinced that we were not just spinning our wheels.”

SO WHAT DOES IT REALLY COST?

At the very basic level, it is lost time for federal workers and lost pay for government contractors. Based on the shutdown of 2013, each working day of shutdown costs approximately $125 million to the US government. The far larger issue is the SSR and the repeat and expiration of it. Beth Ann Bovino, chief economist at S&P Global, says this will go down as a "blip" for the US economy. Goldman Sachs estimates that each week of a shutdown could lead to roughly 0.2% reduction in quarterly GDP growth. The Stock market so far has not been affected. However, there are signs that Investors might be hesitant as the ramifications and analysis of the shutdown becomes more apparent. So is there anything to worry about? Oh my god yes!

Unlike previous shutdowns where partisan and policy conflicts were under control, this time one-party controls both the White House and Congress and this has become the litany of migraines for market analysts and economists. The key issue that would keep these folks up at night is the budget and the SSR.