Government Shutdown Avoided… But Another Fiscal Crisis Looms
A partial government shutdown in 2013 temporarily closed down the Lincoln Memorial. Source: Military Times
Last week, the White House informed federal agencies to make preparations for a potential government shutdown. The possible government shutdown is due to an ongoing dispute about how federal funds should be appropriated. Through acts of Congress, money is appropriated to pay for government actions. Congress can either pass a bill providing full funding to the government for the next year or push through a “Continuing Resolution” — which results in short term funding.
This would not be the first instance of a government shutdown. Historically, most instances of a shutdown were only for a few days but more recent shutdowns in 1995, 2013, and 2018 have lasted for 15 days or longer. The ’95 shutdown concerned disagreements between the GOP controlled house and President Clinton over debt and balancing of the budget. Republicans sought to bring down government expenditures while Clinton resisted budget cuts. In 2013, the government shutdown as Democrats and Republicans failed to agree upon budget provisions concerning Obamacare. Republicans wanted to deny funding for Obamacare whilst Democrats supported a budget resolution with less strings attached. Finally, in 2018 the government shutdown over disputes about funding President Trump’s border wall. Democrats denied the president a budget that would allow for construction of a wall on the southern border.
In all cases, the motivations for shutting down the government were political. This use of “brinksmanship” has been used in attempt to shore up public support. Both parties believed public pressure created by shutdown would force the other to concede and lead to a policy victory. Regardless, a government shutdown would have very real effects on American citizens.
A government shutdown would nonetheless impact the American people in a variety of ways. Government services deemed “non-essential” such as the National Park Service would cease operations. Additionally, several hundred thousand federal employees would likely go without pay for the duration of the shutdown. On the other hand, services deemed “essential” and programs with mandatory spending would continue operations. Essential programs that would continue to operate include the border patrol, air traffic control, and the department of defense. Social Security, Medicare, and food stamp programs would continue operations. So, what created the possibility for a new government shutdown? To put it simply… Washington politics.
Democratic and Republican lawmakers have disagreed on two specific areas of fiscal policy. In a September 21st party line vote, House Democrats passed a resolution providing for government funding and a suspension of the debt ceiling. However, the resolution failed to materialize as Senate Republicans have been united in opposition for raising the government’s borrowing limit. In a speech directed to President Biden (D), Senate Minority Leader Mitch McConnell (R-Ky) stated, “We have simply warned that since your party wishes to govern alone, it must handle the debt limit alone as well.”. The Republicans more or less will not go on the voting record in support of Biden’s agenda. However, breaching the debt ceiling has many significant effects that differ from a government shutdown.
Breaching the debt ceiling will result in the U.S. government defaulting on debt payments. Treasury Secretary Janet Yellen stated that the government would run out of funds on October 18th. An economic crisis would certainly be born if the U.S. failed to meet its debt obligations for the first time in history. As it stands now, it is unknown if the ceiling will be raised or not.
On the contrary, Congress has just passed a resolution funding the government through December 3rd. On September 30th, the resolution was passed and then signed into law by President Biden. However, the resolution was absent a provision increasing the debt ceiling. The resolution received bipartisan support in Congress as opposed to the previous resolution that involved the debt ceiling. While this area of fiscal contention has been resolved, the Federal government has much work to do to resolve its debt ceiling issues.