What Shutdown History Teaches Us

This really happened…

The September 30 to October 2 shutdown in 1982 started because the Congress and President Reagan “had other plans.” When the fiscal year ended on Thursday September 30, the House and Senate had agreed on a compromise. But because of a White House barbecue for the Congress and a Democratic $1,000 a plate fundraiser, there was no late night session.

Shutdown History

Causes

The government used to remain open if the President and the Congress disagreed about the federal budget. Yes, sometimes agencies didn’t receive their yearly appropriations. But, assuming they would soon get their money, officials ignored the lapse.

It all changed with the Congressional Budget Act of 1974 when the Congress got more of the power of the purse. Then, it got worse when we added an increasingly strict interpretation of the 1884 Antideficiency Act. As a result, we wound up with a “messier” process involving more people and inflexible spending rules.

For some shutdowns, the impact was minimal while with others we had hundreds of thousands of furloughed employees. The one constant was the huge variety of issues. Abortion funding, foreign aid, the deficit, immigration and a border wall were only several of the causes of budget impasses. And now, as our 23rd shutdown unfolds, it’s the Affordable Care Act and Medicaid.

Funding Gaps

President Trump tops the list for funding gap shutdowns while Presidents Biden and W. Bush had none:

President Trump also is #1 for shutdown lengths:

Our Bottom Line: Shutdown Cost

Always defining cost as more than money, as economists, we mean sacrifice.

In breadth and depth, a shutdown has massive cost.

Before, agencies have to wind down and freeze payments and close facilities. Contractors, knowing there always might be a disruption pad their contracts. Affecting state and local governments, the absence of federal obligations “ricochets” through the economy. CBO estimates that the 2018 shutdown, in dollars, was a $3 billion hit. Upping the totals, now they estimate GDP growth will sink as much as $14 billion– a 1.0 to 2.0 percent decline from what would have been.

Still, the cost of a shutdown is tough to measure. Government revenue declines from closed national parks and tourism sites. Safety could be a problem that includes air traffic, and food, and environmental inspections. Add to that mortgages that aren’t approved because the IRS halted income verifications. Think about the airlines, hotels, and wedding planners that lose business. And don’t forget “non-essential” government statisticians with no data for policy planners.

So, what does shutdown history teach us? I do not know.

My sources and more: Always great for graphics, Axios, here, here, and here had most of today’s images. From there, Harvard’s Kennedy School had a shutdown explainer. And finally, Vox had the story of the 18 shutdowns until 2018 while USA Today brought us up-to-date.

Please note that several of today’s sections were in a previous econlife post.