The Office of Management and Budget released a report detailing the costs of last month’s government shutdown. “Impacts and Costs of the October 2013 Federal Government Shutdown” explains the depth, breadth, and cost of Congress’ failure to fund the federal government. The verdict? The government shutdown was disastrous for the economy, the budget, the federal workforce, and the public.
The report covers substantial ground, describing the wide variety of federal programs that were affected by the shutdown. It is true, not every action or function of government is popular, and some of the areas that were impacted by the shutdown may be viewed by some as harmless or even beneficial. However, this report highlights the impact on several areas that should alarm most citizens, particularly those who want their government to be efficient and effective. Below, I detail a few.
- Disabled American Veterans
The brave men and women who risk their lives to defend our nation should never fall victim to petty Congressional political theatrics. However, during the first half of October they did. The report explains that the shutdown “stalled weekly progress in reducing the veterans’ disability claims backlog, which had previously been progressing at a rate of almost 20,000 claims per week. In the six months before the shutdown, the Department of Veterans Affairs reduced the…backlog by about 30%…” Despite Congress holding hearings and demanding answers and action on this backlog, the inability to fund the government stopped progress toward helping disabled veterans get their benefits.
- Veterans’ Job Retraining
Most Americans agree that when our deployed servicemen and servicewomen return from overseas and transition back into civilian life, the government should assist in their job search and training. Several government programs assist in this task. During the shutdown, “40 TAP (Transition Assistance Program) employment workshops were cancelled and had to be rescheduled, which delayed transition support to 1,400 service members.” The effects were significant for America’s heroes searching for employment.
- Waste, Fraud, & Abuse Identification
Congress always laments waste, fraud and abuse in government programs. Congressional press releases, hearings, floor speeches, and political ads frequently condemn the bureaucracy for these problems. Some argue that the path to a balanced budget runs through the identification and eradication of waste, fraud and abuse. The shutdown complicated that task. Waste, fraud and abuse is often identified through “program integrity activities.” These were dramatically reduced or halted for many agencies. They included delays “in completing over 1,600 medical disability reviews and over 10,000 Supplemental Security Income (SSI) redeterminations each day.” These interruptions were particularly problematic, given “the fact that these measures save money in the long run.”
- Costs for the Private Sector
In many ways, the private sector saw costs. It has been estimated in a variety of ways, using a variety of sources. Moody’s noted that the economy took a more than $20 billion hit, while the loss in GDP has been estimated up to 0.5%. OMB/BLS estimate that the shutdown limited the creation of 120,000 jobs. Beyond these costs, specific policy areas that were hit hard. Businesses depend on the Social Security Administration and Internal Revenue Service to check the accuracy and integrity of documentation including social security numbers for a variety of business services. The report notes that “two weeks into the shutdown, the Internal Revenue Service (IRS) had an inventory of 1.2 million verification requests that could not be processed, potentially delaying approval of mortgages and other loans.”
- Federal Contractors: More Costs for the Private Sector
Private contractors conduct many services for the federal government, particularly for the Department of Defense. The shutdown affected those contractors, who employ thousands of Americans, and provide important defense services. While those impacts could be felt broadly, small business contracts took a particular hit. The report notes that “over the first two weeks of the shutdown, small businesses contracts with DOD were cut by almost one-third and spending was down 40%, compared with the same period in the previous year.”
- Safety and Health
Government monitors a variety of policies involved in health and safety that affects all Americans. Three areas are of specific concern. FDA food safety investigations were severely limited; the agency was only able “to conduct ‘for cause’ inspections where there was an imminent threat to health or life, nearly 500 food and feed domestic inspections and roughly 355 state inspections that are normally performed during this period…did not occur during the shutdown.” Other areas impacted included 59 aircraft accident investigations that were halted because of furloughs at NTSB, and 1,400 workplace safety investigations were also stopped by OSHA. These have serious effects for the lives every individual, even when those effects were not readily visible.
In the end, the government shutdown affected a variety of government services. The impact was not simply federal workers not getting paychecks (although 6.6 million days of work were lost); it was not simply the World War II Memorial’s shutter (though the National Park service lost fees of $450,000 per day and the costs to tourism were estimated at up to $500 million). The effects had profound impacts beyond the popular shutdown talking points.
Too often, what is ignored in political gamesmanship, or in this case political brinkmanship, is that there are substantial human and economic costs from action or inaction. The failure to pass a resolution funding the government affected our nation’s most vulnerable, hurt the private sector, and created a managerial mess for the federal government. The government shutdown was a disaster for the American public, and understanding these costs and (un)intended consequences is critical for preventing another shutdown early next year.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.