Shutdown

As 2019 begins, the federal government remains partially shut down. Proposals are still surfacing and meetings are still being arranged, but as I write this it looks like it could go on for a while (by the time this is printed, it could all be over). One of the central points of disagreement is funding for the border wall, which is a highly controversial sticking point. It will be difficult to reach an agreement, and the longer the shutdown goes on, the more the economic costs will mount.

Even if the shutdown has already ended by the time you’re reading this, it has once again highlighted a very serious problem in our federal government: an inability to agree on a budget (or much of anything else). It’s not the first time we’ve been here, and it won’t be the last. Maintaining basic budget authority to keep the doors open should not be that difficult, and the repeated failures are symptomatic of a lack of ability to tackle many more complex and important problems.

The shutdown is a tremendous hardship to many of the 800,000 people and their families who are directly affected. They are either working without pay if their jobs are considered essential (such as airport security staff) or on leave without pay. Even though they will probably be compensated when the situation is resolved, the human cost is very real particularly given the timing.

It the shutdown ends soon, it will be little more than an inconvenience for the vast majority of Americans. Apart from the workers furloughed or persons directly in need of services affected by the shutdown, the fallout for most individuals will probably be minimal. The employees who are furloughed will likely end up compensated for their time when things shake out; in any case, the consumer spending effects of 800,000 people for a few days given the size of the United States economy are relatively small.

If the shutdown continues, however, effects will begin to compound. Closed offices negatively affect nearby businesses such as restaurants. Furloughed agencies slow processes such as small business loans. Over time, the issues will become bigger and the costs will rise. The associated uncertainty can also reduce or delay private investment decisions and add to market volatility.

Essential functions are still going on and few people are directly affected by the shutdown. At the same time, however, the issue is larger than simply closing doors on some museums and monuments and falling a few more days behind on paperwork. The fact remains that at some point in time, Congress and the administration must work together to deal with budget issues and other, more significant, points of contention.