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 »
CHINA OBJECTS
U.S. Destroyer Sails Close to Artificial Chinese Island
29 minutes ago
THE DETAILS

A Navy destroyer sailed within 12 miles of an artificial island built by China in the South China Sea, one of several such islands at the center of territorial disputes with other nearby nations. The U.S. called it a "freedom of navigation exercise." Chinese Defense Ministry spokesman Ren Guoqiang "said China had lodged stern representations to the U.S over the patrol and that such moves were not conducive to peace and stability in the South China Sea."

Source:
MINIMUM 2 PERCENT GDP
Trump Tells NATO Countries To Pay Up
1 hours ago
BREAKING
OVER LEAKS
U.K. Police No Longer Sharing Manchester Info With U.S.
2 hours ago
THE LATEST
MANAFORT AND FLYNN
Russians Discussed Influencing Trump Through Aides
3 hours ago
THE DETAILS

"American spies collected information last summer revealing that senior Russian intelligence and political officials were discussing how to exert influence over Donald J. Trump through his advisers." The conversations centered around Paul Manafort, who was campaign chairman at the time, and Michael Flynn, former national security adviser and then a close campaign surrogate. Both men have been tied heavily with Russia and Flynn is currently at the center of the FBI investigation into possible collusion between the Trump campaign and Russia.

Source:
DAY BEFORE ELECTION
Montana House Candidate Charged With Assault
3 hours ago
THE DETAILS

Greg Gianforte, the Montana Republican candidate for the state's lone House seat, was cited for misdemeanor assault Wednesday night after he allegedly body-slammed Guardian reporter Ben Jacobs. Jacobs entered a room in which Gianforte was preparing to give an interview to Fox News, and asked Gianforte about the recently released CBO score on health care legislation, at which point, according to an account from Fox News's Alicia Acuna, Gianforte put both hands around Jacobs's neck and slammed him to the ground. The Gallatin County Sheriff’s Office put out a statement saying there was probable cause for the citation but not the injuries required for it to be considered a felony. Gianforte's aide put out an erroneous statement saying Jacobs grabbed Gianforte by the wrist after aggressively putting a recorder in Gianforte's face.

Source:
×
×

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.

Login