Government Shutdown: Causes and Effects – RantAWeek
RantAWeek

Using a RantAWeek to clarify the complexities of the news.

RSS Feed

Government Shutdown: Causes and Effects

0 Comments
Posted by Tyler Miksanek on October 6, 2013 at 5:47 pm

On October 1st, the United States Congress failed to pass a continuing resolution needed to finance government activities, leading to a government shutdown.  This information has been all over the news media, but often without a clear and concise explanation of what exactly is going on and what it all means.

To clear up the confusion, a little background is necessary.  One of Congress’s constitutional responsibilities is to pass the nation’s budget.  However, in recent years, Congressional stalemate has made complete budget overhauls rare, and Congress has often relied on Continuing Resolutions (CRs) to keep government funded.  CRs are used as a sort of legislative compromise mechanism; they don’t specify specific increases or decreases in funding to each government program, but instead provide across the board funding based on appropriations levels of the year before.

But even though CRs are a compromise designed to be much simpler and therefore easier to pass than a full budget, Congress still failed to pass one.  The underlying reason was, interestingly enough, not a fight over appropriations but a fight over healthcare.  Congressional Republicans, led by Senator Ted Cruz, said they would only pass a CR if it included a dismantling of the Affordable Care Act, popularly referred to as Obamacare.  Democrats refused to accept their terms, and since each party controls one house of Congress, a stalemate was reached.  The morning of October 1st marked the beginning of a new fiscal year, but without a continuing appropriations bill, nonessential government operations were shut down.

The term ‘nonessential’ is key.  A government shutdown does not mean America’s nuclear arsenal is left unattended and airport security disappears.  These government operations are considered essential to the continued safety and security of the United States.  Still, the ‘nonessential’ part of government includes the 800,000 government workers who were sent home on furlough, including the majority of NASA, the Department of Commerce, and the Department of Labor, in addition to half the Department of Defense.  Important programs and government services are now without funds, potentially causing trouble for those who depend on them.

Unfortunately, the negative effects of this government shutdown are almost insignificant compared to the potential negative effects if the debt ceiling is not raised later this month.  While the debt ceiling and the government shutdown are often incorrectly thought of as being the same problem, they are actually two different concerns entirely.  The government shutdown occurred because Congress failed to appropriate money to fund programs.  Raising the debt ceiling allows Congress to borrow money to fund programs.  More simply, government shutdown is to spending as debt ceiling is to borrowing.

That explanation still doesn’t demonstrate why not raising the debt ceiling is so catastrophic.  If the debt ceiling is not raised by October 17th, the government will be spending more money than it is taking in without an ability to borrow more, setting the United States on the path to credit default.  An advanced sovereign nation defaulting on its debt is exceedingly rare, and usually precipitates economic turmoil for the country involved.  And given that the United States is not only the largest economy in the world but also that the United States dollar is the main reserve currency of the world, the international consequences of a default would multiply the economic destruction of already severe domestic effects.

Because of the dire stakes, it is extremely unlikely politicians will actually allow the government to default.  That being said, a ‘grand bargain’ where both sides of the aisle can come to a comprehensive, long-term solution on both borrowing and spending is just as unlikely, especially in the hostile political environment the government shutdown has created.  The most likely solution is a series of stopgap fixes to increase the debt ceiling and restart the government.  Ultimately, we shouldn’t expect a panacea to our nation’s woes – Washington is too divided for that – but we shouldn’t expect Armageddon either.

Filed under Domestic, Economy
Tagged as ,
You can skip to the end and leave a comment. Pinging is currently not allowed.

0 Comments

You can be the first to comment!

Leave a Reply

Your email address will not be published. Required fields are marked *

RantAWeek Archives

Categories