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
Add to Briefcase
See more stories about...
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!

What We're Following See More »
Colin Powell to Vote for Clinton
31 minutes ago
Cook Report: Dems to Pick up 5-7 Seats, Retake Senate
2 hours ago

Since the release of the Access Hollywood tape, on which Donald Trump boasted of sexually assaulting women, "Senate Republicans have seen their fortunes dip, particularly in states like Florida, North Carolina, New Hampshire, Nevada and Pennsylvania," where Hillary Clinton now leads. Jennifer Duffy writes that she now expects Democrats to gain five to seven seats—enough to regain control of the chamber.

"Of the Senate seats in the Toss Up column, Trump only leads in Indiana and Missouri where both Republicans are running a few points behind him. ... History shows that races in the Toss Up column never split down the middle; one party tends to win the lion’s share of them."

Tying Republicans to Trump Now an Actionable Offense
4 hours ago

"Some Republicans are running so far away from their party’s nominee that they are threatening to sue TV stations for running ads that suggest they support Donald Trump. Just two weeks before Election Day, five Republicans―Reps. Bob Dold (R-Ill.), Mike Coffman (R-Colo.), David Jolly (R-Fla.), John Katko (R-N.Y.) and Brian Fitzpatrick, a Pennsylvania Republican running for an open seat that’s currently occupied by his brother―contend that certain commercials paid for by the Democratic Congressional Campaign Committee provide false or misleading information by connecting them to the GOP nominee. Trump is so terrible, these Republicans are essentially arguing, that tying them to him amounts to defamation."

Former Congressman Schock Fined $10,000
4 hours ago

Former Illinois GOP Congressman Aaron Schock "recently agreed to pay a $10,000 fine for making an excessive solicitation for a super PAC that was active in his home state of Illinois four years ago." Schock resigned from Congress after a story about his Downton Abbey-themed congressional office raised questions about how he was using taxpayer dollars.

Clinton Reaching Out to GOP Senators
5 hours ago

If you need a marker for how confident Hillary Clinton is at this point of the race, here's one: CNN's Jeff Zeleny reports "she's been talking to Republican senators, old allies and new, saying that she is willing to work with them and govern."


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.