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Jan 11, 2019

The Impact of a Government Shutdown

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Regardless of where you fall on the political spectrum, a government shutdown can be quite impactful. Maybe you don’t think it’s a big deal because you don’t see it having a direct impact on your financial well-being. Well, believe it or not, it may. Let’s explore this a bit further so you’re up-to-speed on the current environment and how you may experience the influence of government shutdown in your own life.

What exactly is a (partial) government shutdown? Each year, Congress designates (or “appropriates”) money in its budget for the multitude of services and departments that constitute the federal government. This year’s budget was adopted back in October but some agencies not funded in that budget have continued to operate since it is based on temporary stop-gap spending appropriations. 

The last of these temporary stop-gap extensions expired on December 21st, and have been unfunded since then. Many essential services are funded in the regular budget, so calling this a “government shutdown” is somewhat of a misnomer. However, the services that are not (yet) funded have had to shut down, furloughing employees; or in some cases, causing employees to work without pay.
 
The cause of the shutdown is primarily political posturing and ultimatums that make it difficult for the various parts of government to compromise and agree on a budget. In particular, Congress has been unwilling to fund President Trump’s $5 billion proposed border wall. Building that wall was a keystone of President Trump’s election campaign, so he has a large interest in seeing it succeed. Congress for its part has a lot that it wants to do with that $5 billion and has been reluctant to approve funding for the border wall. The current situation will continue until one or both sides give in or perceive an advantage in compromise. In the meantime, we wait.
 
As of this publication date, the current partial government shutdown is only two days shy of the longest shutdown ever. In 1995, a similar fight erupted between congressional Republicans and Democratic President Bill Clinton.
 
Gaps between budgeted expenditures and available monies have existed many times before, but services have continued while the political process worked out the kinks. The current rules for which a gap in funding results and the suspension of some services happens began in the 1980s. Since then, there have been fewer gaps, but the shutdowns have lasted longer as all parties have seen the political advantage for themselves in increasingly entrenched positions.

Which government services are affected? The shutdown affects all areas of the government that doesn’t have either a permanent funding source outside the Congressional appropriations process or that were funded in the primary budget set last October. The Postal Service, for example, derives its income not from Congressional appropriations but from fees and sales to those who use their services, so mail service has suffered no issue. Social Security payments continue because they come from a trust account and do not rely on annual Congressional appropriations.
 
Some federal employees whose jobs involve the protection of human life and property, as well as other services deemed as necessities, continue to work during the shutdown though it is not clear whether they will be back-paid for their work. In past shutdowns, members of the armed forces including the Coast Guard and reservists have been required to show up for work even though their salaries are not guaranteed. That scenario is unlikely in the current shutdown but many other services are in limbo, including the departments of Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation and Housing and Urban Development.
 
Ironically, many furloughed employees include TSA workers, air traffic controllers, and border security guards. The E-Verify program, which lets employers check the qualification of non-citizens to work in the U.S. is down. Most employees in those departments are also on unpaid furlough. On social media, the hashtag #ShutdownStories has gone viral with thousands of stories of the hardship caused by this shutdown.
 
This shutdown has also caused massive and very public problems in national museums and parks. Furloughed rangers from Yosemite in California and Crater Lake in Oregon report that these National Parks are experiencing unprecedented levels of human-wrought destruction as a result of the lack of supervision.
 
In Minnesota, for example, the Mississippi National River and Recreational Area remain open to the public, but all park ranger services are shut down. This pattern holds throughout the country, with national parks open to the public but the lack of services (restrooms, trash collection, visitor centers) have caused visitors to deposit their waste in highly destructive ways. The Lincoln Memorial and other Capitol monuments are closed, as well as all the facilities of the Smithsonian Museum.

What impact may the current shutdown have on me? Whether or not you’re a federal employee, you may still be impacted by the shutdown. If the shutdown persists, it is likely that many of the following will continue or result:
  • The Food and Drug Administration is not doing any routine inspections which poses an obvious threat to the nation’s food supply and safety.
  • Although most USDA staff are on unpaid furlough, food stamps and Supplemental Nutrition Assistance Program (SNAP) can continue to be funded by a contingency fund established in 2017 but will run out of funds if the shutdown continues through March.
  • Income tax refunds may be delayed if the shutdown persists. The Trump Administration has stated that tax returns are allowed to be processed, in contrast to the general principle that operated in past shutdowns.
  • Federal law enforcement such as the FBI is partially closed. Some FBI agents have requested to fund themselves through GoFundMe campaigns.
  • The federal judiciary continues to operate on a reduced scale, with backlogs piling up. How effective it can be with severely cut funds remains to be seen.
  • The Small Business Association has stopped processing new loans, and J.P. Morgan estimates that the US economy is losing approximately $1.5 billion per week as a result of the shutdown.
  • Charities that provide assistance to people in need will be heavily burdened during this time. People who have time or money to spare will be needed.

It’s clear that this shutdown has significant impact for many people - some more than others. And since we aren’t sure when the current shutdown will end, take the time now to understand how this directly impacts your life. If you are a federal employee or you are just concerned about your financial situation during this time, explore those resources available to you and speak with experts to help. The shutdown will come to an end eventually but residual effects may linger.


Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date.

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