Jul 22, 2019

Government shutdown may threaten economy

Day one of federal government shutdown

Park ranger Jeff Gardner informs visitors of the closure of Yosemite National Park due to the government shutdown Tuesday. Day visitors were allowed to pass through Yosemite but were instructed not to stop or use any facilities. Photo Craig Kohlruss/Fresno Bee/MCT

The partial shutdown of the U.S. government may not inflict immediate harm to Fresno State or the rest of the country, but there may be reasons for concern if it drags on.

“The longer it lasts, the more harm will be done,” said Dr. Thomas Holyoke from the political science department.  “The longer it goes on, it will take a toll on people.  People won’t get services.  Most federal workers aren’t getting paychecks.  This takes a terrible economic toll pretty quickly.”

Certain essential services, like Medicare and Social Security, are automatically funded, said economics professor Dr. David Vera.

Vera said that the shutdown is currently more of a pause.  If it continues, a political crisis creeps closer to an economic crisis, he said.

“It’s a slow fever, and as the temperature goes up, we may see more effects,” Vera said. “It will eventually be painful.”

Holyoke said Congress is supposed to fund U.S. government, which requires passing appropriation bills.  Because of the acrimonious nature of U.S. politics the past few years, he said Congress has been unable to get bills passed.

“The U.S. House will pass a bill, and the Senate won’t, or vice versa, or the President will veto,” Holyoke said.

With the appropriation process broken down, Holyoke said Congress has been passing continuing resolutions to fund the government at the same level in the past.

“The House decided it was an opportunity to force President [Barack] Obama to stop implementing Obamacare,” Holyoke said. ‘We’ll pass the resolution, but we’ll attach a requirement to take money from the Affordable Care Act,’ essentially destroying it.  The Senate didn’t like that.  The Democrats took out that language and sent it back to House.  The House said, ‘No, put it back in.’”

The latest continuing resolution ended Oct. 1.

“While they’re playing hot potato, Oct. 1 comes and the government doesn’t have money to operate,” Holyoke said.

Thus, the shutdown began.

“This will continue until Congress passes a continuing resolution. Who knows when that will be,” Holyoke said. “I have no idea how this is going to resolve.  I wish I did.”

If the shutdown lasts a week, it could amount to about $1.6 billion in lost economic activity, according to a report Tuesday from economic forecaster IHS Global Insight.

The estimate is based on the 1995 government shutdown, where 36 percent of the 2.2 million federal civilian non-postal workers were furloughed. Using that gauge for the current 2.15 million federal non-postal workers, about 774,000 workers would be furloughed and lose their wages, at least temporarily.

“We know that the last time Republicans shut down the government in 1996, it hurt our economy. And unlike 1996, our economy is still recovering from the worst recession in generations,” said Obama during a White House speech celebrating the start of key provisions in the Affordable Care Act.

The longest shutdown in U.S. history was 21 days (from December 1995 into January 1996). Vera said this Congress doesn’t have that kind of time.

The debt ceiling has a deadline of Oct. 17.  Vera said the debt ceiling and shutdown are not the same problem, but they could overlap.

“In two weeks they’ll be arguing about the debt ceiling,” Vera said. “This is bad timing for a shutdown.”

The U.S. has never breached the debt ceiling, which would effectively mean the U.S. has defaulted on its debt.

It would greatly damage the perception of U.S. economic stability, Vera said, and harm the country’s ability to borrow money.

McClatchy Washington Bureau reporter Kevin G. Hall contributed to this article. 

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