When the government stops all but essential services, it is called a shutdown. It happens when the president refuses to sign spending measures passed by Congress or when Congress fails to provide funding.
Appropriations bills are typically passed by Congress and signed by the president by September 30 for the following fiscal year, which begins on October 1. Otherwise, Congress and the president can enact a continuing funding resolution to keep spending at current levels if they don’t meet the deadline. Failure to do so results in the system being offline. That’s a sure evidence of a major collapse in the budgeting system.1
Note
An issue with the debt ceiling is distinct from a government shutdown. The first is if Congress hasn’t set aside money for a certain purpose. The second is if lawmakers refuse to increase the debt limit. The debt ceiling limits the amount the Treasury can borrow. The government entities involved in both scenarios are severely underfunded. The second scenario involves a U.S. default on its obligations because the Treasury Department is unable to make payments to holders of Treasury securities.
When the government closes down, what happens
The majority of government agencies rely on discretionary funding. These agencies have to shut down unless they have a surplus of finances to keep operating when Congress doesn’t authorize money for them.Many federal workers are forced to take unpaid leave during a shutdown. They will be sent home without compensation.
It’s possible that essential service workers will be expected to put in unpaid overtime. National security is an example of an essential service. Once funding is given the green light, everyone gets paid back.2
It is common practice for organizations that offer vital services to be prepared to keep running for weeks without a budget. Transportation Security Administration, U.S. Customs and Border Protection, FEMA, and ICE are all operational as usual.3 The Justice Department relies on a variety of funding mechanisms to carry out its many responsibilities.4 Until that reserve is depleted, mail will continue to be delivered by the Postal Service.5The wages of the president and members of Congress are shielded from a government shutdown under the Constitution.6
Funding for government programs including Social Security, Medicare, and Medicaid is expected. Due to the automatic nature of their funding, mandatory programs are rarely cancelled. They existed because Congress passed such laws.
Here is an illustration of how the closure from 2018–2019 affected some of the most important government agencies. Where possible, it also details the percentage of employees who were placed on furlough.7
43.5 percent of the labor force is involved in agriculture.
Employment in the commercial sector accounts for 31.5 percent of the total. The Bureau of Economic Analysis has been slow in releasing its reports. The NWS kept up their forecasting efforts.
The public education system continued operations. Many workers were given unpaid leave.Eighth, the nation’s nuclear weapons and nuclear energy plants continued to be subject to regular safety inspections.Ninety-two point nine percent of EPA employees.
Staff at the FDA constitutes 29.4 percent.
Employment in the Health and Human Services Sector accounts for 24% of total personnel.The Department of Homeland Security employs 10.
In the field of Housing and Urban Development, 86.7% of the workforce is involved.
Most IRS operations have been suspended.11
82.9 percent of the workforce inside: All of our country’s national landmarks and parks were closed.
Fairness: 15.9% of the workforce.
The majority of workers (77.7 percent) are laborers. The majority of operations came to a halt, including those of the Bureau of Labor Statistics and the inquiries into worker safety.12 NASA: The International Space Station support crew all kept their jobs.There were no Smithsonian museums open on January 13th. Caretakers of National Collections’ animals and archival materials, as well as security personnel, kept their jobs.There were no furloughs in the 14th state.
Treasury: almost 42% of the workforce.
Economic Consequences
The economy suffers when work is interrupted. Government spending at the federal level is a factor because it contributes to GDP. It accounts for around 7% of the total economic output.15 Workers and contractors who go without pay tend to cut back on discretionary spending. The longer the shutdown lasts, the worse this effect becomes.
The 2018 closure, for instance, cost the economy an estimated $11 billion. That breaks down to $3.1 billion in Q4 2018 and $8 billion in Q1 2019. It’s likely that the actual cost of the stoppage is higher. The CBO was unable to provide an estimate of the cost to enterprises that were delayed in receiving necessary federal permits or loans.16
Recent Government Shutdowns in the U.S.
Shortages in financing did occur before 1980, but they usually did not result in shutdowns. Agencies reasoned that Congress expected them to continue operations, so they did. In two separate rulings, U.S. Attorney General Benjamin R. Civiletti ordered federal agencies to halt operations until Congress authorized sufficient funding to resume them. Only critical services and government organizations could survive.17
From December 21, 2018, until January 25, 2019, a total of 35 days were lost during the longest shutdown. As of October 1, 2013, a 16-day shutdown had begun. There were two brief shutdowns in January and February of 2018.18
2019
A government shutdown that had begun in 2018 continued into the new year. On January 25, 2019, it came to an end.17
2018
On Friday, January 19, 2018, the government shut down for the first time in 2018. This shutdown lasted for over three days. The Senate did not approve a continuing resolution to fund government operations past February 16, 2018. The resolution served as a stopgap until the fiscal year 2018 budget could be approved.19
The shutdown was concluded by Congress on January 22. A continuing resolution was passed, however it ran out of time on February 8, 2018.19
Shortly after midnight on February 8th, the government shut down again until the president and congress could agree on a new continuing resolution.19
The third shutdown started on December 22, 2018. A total of 34 days passed until January 25, 2019. It put off discretionary spending totaling $18 billion. There was a $11 billion drop in GDP as a result of this, $3 billion in Q4 2018 and $8 billion in Q1 2019.172
2013
There was a shutdown from October 1st, 2013 until October 17th, 2013. About 40 percent of the federal government’s civilian workforce, or about 850,000 people, were furloughed. GDP fell by 0.3% as a result of government spending cuts.20
The Republicans delayed Obamacare’s rollout by shutting down the government. A continuing resolution was proposed by the Republican-controlled House that did not include enough money to implement the Affordable Care Act of 2010. The measure failed in the Senate, so they sent back another one that really paid for the program. That bill went unnoticed in the House. It bounced back a message that slowed down the rollout of Obamacare. The government shutdown because the Senate refused to vote on the bill.
Despite the shutdown, Obamacare continued to be implemented. Like Medicare and Social Security, it receives a sizable portion of its financing from the obligatory budget. Health and Human Services has already dispersed the start-up money for the health insurance markets.22
The Obama administration estimated that GDP growth was reduced by 0.2% to 0.6% due to the shutdown. As a result, 120,000 jobs were lost. Daily, the government had to furlough some 850,000 workers.23
1995
Both during November 13–19, 1995, and again on December 15–January 6, 1996, the government was closed due to a lack of funding.24
825,000 federal workers were furloughed during the first shutdown. There were a total of 284,000 government workers who were furloughed during the second shutdown.25 As a result of Congress passing several appropriations bills prior to the second shutdown, fewer government employees were forced to take unpaid leave. As a result of the reclassification of the positions as important, other workers were called back without compensation.
The Office of Management and Budget estimates that $1.4 billion was lost during the two shutdowns.26 The present value is $2.4 billion. In addition, 480,000 emergency workers, including as police officers, nurses, and FBI agents, did their jobs for free. The monthly education payments for at least 170,000 veterans were not paid. There was a backlog of over 200 thousand passport applications. There was a loss of about 7 million potential visitors to National Parks and 2 million potential museumgoers.
