The Case for Some Shutdown Urgency

The danger of the shutdown isn’t that it happened. The danger is that it continues.

A US Senate employee walks through the Capitol Crypt at the US Capitol in Washington, DC, September 25, 2013.
National Journal
Brian Resnick
Oct. 3, 2013, 8:37 a.m.

Here’s why the shut­down should be re­solved as quickly and com­pre­hens­ively as pos­sible.

The shut­down costs $300 mil­lion a day, $1.6 bil­lion a week.

That’s the amount ana­lyst firm IHS Glob­al In­sight es­tim­ates the shut­down is cost­ing in terms of lost eco­nom­ic out­put. Ac­cord­ing to re­search firm Mac­roe­co­nom­ic Ad­visers, a two-week shut­down would de­crease gross do­mest­ic product growth by 0.3 per­cent. Three weeks would raise that to 0.5 per­cent. A shut­down last­ing the en­tire month of Oc­to­ber would de­crease the GDP by 0.7 per­cent. Moody’s Ana­lyt­ics es­tim­ates a high­er cost, say­ing a three- or four-week shut­down will de­crease growth by 1.4 per­cent. Yes, $1.6 bil­lion a week is min­is­cule com­pared with the $16 tril­lion U.S. eco­nomy. But it will add up as the shut­down con­tin­ues.

But that de­crease in GDP could be re­covered if Con­gress votes to give fur­loughed em­ploy­ees back pay.

More than 800,000 work­ers are fur­loughed dur­ing the shut­down. But if they were to get paid for their time away from work, GDP would re­bound. “Fol­low­ing a shut­down, real com­pens­a­tion would simply re­turn to its pre­vi­ous level, tem­por­ar­ily boost­ing GDP growth by roughly the same amount that the de­cline in real com­pens­a­tion re­duced it,” Mac­roe­co­nom­ic Ad­visers ex­plains. While there is pre­ced­ent for Con­gress to give work­ers back pay after a shut­down, it’s no guar­an­tee.

If the shut­down drags on, it can take con­sumer con­fid­ence down with it.

The longer the shut­down goes on, the more un­cer­tainty arises in the eco­nomy (es­pe­cially as the debt ceil­ing ap­proaches). Con­sumer con­fid­ence is a tricky thing to pre­dict, but ana­lysts from IHS, Ox­ford Eco­nom­ics, TD Se­cur­it­ies USA, and oth­ers are all telling re­port­ers the same thing: A long shut­down could only erode con­fid­ence.

At The At­lantic, Mat­thew O’Bri­en, points out that eco­nom­ic con­fid­ence already began to drop as the shut­down be­came more likely, as seen in this chart from Gal­lup.

If the gov­ern­ment back pays its work­ers, it will be out a lot of cash. The longer the shut­down, the more money it will lose by the time it’s over.

The eco­nomy will prob­ably re­bound if the gov­ern­ment pays its work­ers for their fur­loughs — but that’s all wasted money. Es­sen­tially, the gov­ern­ment will be pay­ing for paid va­ca­tions. The Con­gres­sion­al Re­search Ser­vice, cit­ing the Of­fice of Man­age­ment and Budget, says the 28-day shut­down of 1995-96 cost the gov­ern­ment $1.4 bil­lion. And in­de­pend­ent re­search sug­gests that num­ber should be even high­er. In today’s dol­lars, that would be more than $2 bil­lion.

The shut­down also costs some money it­self, fig­ur­ing in the se­cur­ity needed to close off usu­ally open areas such as me­mori­als and na­tion­al parks, and strange pro­to­cols such as re­pla­cing a web­site with a “We’re closed” no­tice even though it may be cheap­er just to leave the site up and un-up­dated.

By try­ing to de­fund a pro­gram, Re­pub­lic­ans will be throw­ing out a lot of gov­ern­ment cash.

Open­ing the gov­ern­ment would al­low law­makers to solve the more press­ing prob­lem — the debt ceil­ing.

Treas­ury Sec­ret­ary Jac­ob Lew put in no un­cer­tain terms that the U.S. gov­ern­ment could be­gin de­fault­ing on its debts start­ing Oct. 17 if the debt ceil­ing isn’t raised. This threatens the full faith and cred­it of the coun­try and it would rattle mar­kets, in­crease in­terest rates on U.S. Treas­ury bonds, and up­set the no­tion that the U.S. eco­nomy is the most stable in the world­wide eco­nomy.

In oth­er word: Con­gress, get a move on!

The shutdown costs $300 million a day, $1.6 billion a week.

That’s the amount ana­lyst firm IHS Glob­al In­sight es­tim­ates the shut­down is cost­ing in terms of lost eco­nom­ic out­put. Ac­cord­ing to re­search firm Mac­roe­co­nom­ic Ad­visers, a two-week shut­down would de­crease gross do­mest­ic product growth by 0.3 per­cent. Three weeks would raise that to 0.5 per­cent. A shut­down last­ing the en­tire month of Oc­to­ber would de­crease the GDP by 0.7 per­cent. Moody’s Ana­lyt­ics es­tim­ates a high­er cost, say­ing a three- or four-week shut­down will de­crease growth by 1.4 per­cent. Yes, $1.6 bil­lion a week is min­is­cule com­pared with the $16 tril­lion U.S. eco­nomy. But it will add up as the shut­down con­tin­ues.

But that decrease in GDP could be recovered if Congress votes to give furloughed employees back pay.

More than 800,000 work­ers are fur­loughed dur­ing the shut­down. But if they were to get paid for their time away from work, GDP would re­bound. “Fol­low­ing a shut­down, real com­pens­a­tion would simply re­turn to its pre­vi­ous level, tem­por­ar­ily boost­ing GDP growth by roughly the same amount that the de­cline in real com­pens­a­tion re­duced it,” Mac­roe­co­nom­ic Ad­visers ex­plains. While there is pre­ced­ent for Con­gress to give work­ers back pay after a shut­down, it’s no guar­an­tee.

If the shutdown drags on, it can take consumer confidence down with it.

The longer the shut­down goes on, the more un­cer­tainty arises in the eco­nomy (es­pe­cially as the debt ceil­ing ap­proaches). Con­sumer con­fid­ence is a tricky thing to pre­dict, but ana­lysts from IHS, Ox­ford Eco­nom­ics, TD Se­cur­it­ies USA, and oth­ers are all telling re­port­ers the same thing: A long shut­down could only erode con­fid­ence.

At The At­lantic, Mat­thew O’Bri­en, points out that eco­nom­ic con­fid­ence already began to drop as the shut­down be­came more likely, as seen in this chart from Gal­lup.

If the government back pays its workers, it will be out a lot of cash. The longer the shutdown, the more money it will lose by the time it's over.

The eco­nomy will prob­ably re­bound if the gov­ern­ment pays its work­ers for their fur­loughs — but that’s all wasted money. Es­sen­tially, the gov­ern­ment will be pay­ing for paid va­ca­tions. The Con­gres­sion­al Re­search Ser­vice, cit­ing the Of­fice of Man­age­ment and Budget, says the 28-day shut­down of 1995-96 cost the gov­ern­ment $1.4 bil­lion. And in­de­pend­ent re­search sug­gests that num­ber should be even high­er. In today’s dol­lars, that would be more than $2 bil­lion.

The shut­down also costs some money it­self, fig­ur­ing in the se­cur­ity needed to close off usu­ally open areas such as me­mori­als and na­tion­al parks, and strange pro­to­cols such as re­pla­cing a web­site with a “We’re closed” no­tice even though it may be cheap­er just to leave the site up and un-up­dated.

By try­ing to de­fund a pro­gram, Re­pub­lic­ans will be throw­ing out a lot of gov­ern­ment cash.

Opening the government would allow lawmakers to solve the more pressing problem — the debt ceiling.

Treas­ury Sec­ret­ary Jac­ob Lew put in no un­cer­tain terms that the U.S. gov­ern­ment could be­gin de­fault­ing on its debts start­ing Oct. 17 if the debt ceil­ing isn’t raised. This threatens the full faith and cred­it of the coun­try and it would rattle mar­kets, in­crease in­terest rates on U.S. Treas­ury bonds, and up­set the no­tion that the U.S. eco­nomy is the most stable in the world­wide eco­nomy.

In oth­er word: Con­gress, get a move on!

What We're Following See More »
TAKING A LONG VIEW TO SOUTHERN STATES
In Dropout Speech, Santorum Endorses Rubio
3 days ago
THE DETAILS

As expected after earlier reports on Wednesday, Rick Santorum ended his presidential bid. But less expected: he threw his support to Marco Rubio. After noting he spoke with Rubio the day before for an hour, he said, “Someone who has a real understanding of the threat of ISIS, real understanding of the threat of fundamentalist Islam, and has experience, one of the things I wanted was someone who has experience in this area, and that’s why we decided to support Marco Rubio.” It doesn’t figure to help Rubio much in New Hampshire, but the Santorum nod could pay dividends down the road in southern states.

Source:
‘PITTING PEOPLE AGAINST EACH OTHER’
Rubio, Trump Question Obama’s Mosque Visit
3 days ago
WHY WE CARE

President Obama’s decision to visit a mosque in Baltimore today was never going to be completely uncontroversial. And Donald Trump and Marco Rubio proved it. “Maybe he feels comfortable there,” Trump told interviewer Greta van Susteren on Fox News. “There are a lot of places he can go, and he chose a mosque.” And in New Hampshire, Rubio said of Obama, “Always pitting people against each other. Always. Look at today – he gave a speech at a mosque. Oh, you know, basically implying that America is discriminating against Muslims.”

Source:
THE TIME IS NOW, TED
Cruz Must Max Out on Evangelical Support through Early March
3 days ago
WHY WE CARE

For Ted Cruz, a strong showing in New Hampshire would be nice, but not necessary. That’s because evangelical voters only make up 21% of the Granite State’s population. “But from the February 20 South Carolina primary through March 15, there are nine states (South Carolina, Alabama, Arkansas, Georgia, Oklahoma, Tennessee, Kentucky, Mississippi, and North Carolina) with an estimated white-Evangelical percentage of the GOP electorate over 60 percent, and another four (Texas, Kansas, Louisiana, and Missouri) that come in over 50 percent.” But after that, he better be in the catbird’s seat, because only four smaller states remain with evangelical voter majorities.

Source:
CHRISTIE, BUSH TRYING TO TAKE HIM DOWN
Rubio Now Winning the ‘Endorsement Primary’
3 days ago
WHY WE CARE

Since his strong third-place finish in Iowa, Marco Rubio has won endorsement by two sitting senators and two congressmen, putting him in the lead for the first time of FiveThirtyEight‘s Endorsement Tracker. “Some politicians had put early support behind Jeb Bush — he had led [their] list since August — but since January the only new endorsement he has received was from former presidential candidate Sen. Lindsey Graham.” Meanwhile, the New York Times reports that fueled by resentment, “members of the Bush and Christie campaigns have communicated about their mutual desire to halt … Rubio’s rise in the polls.”

Source:
7 REPUBLICANS ON STAGE
Carly Fiorina Will Not Be Allowed to Debate on Saturday
2 days ago
THE LATEST

ABC News has announced the criteria for Saturday’s Republican debate, and that means Carly Fiorina won’t be a part of it. The network is demanding candidates have “a top-three finish in Iowa, a top-six standing in an average of recent New Hampshire polls or a top-six placement in national polls in order for candidates to qualify.” And there will be no “happy hour” undercard debate this time. “So that means no Fiorina vs. Jim Gilmore showdown earlier in the evening for the most ardent of campaign 2016 junkies.

Source:
×