The News Largely Ignores Looming Fiscal Crisis
INTERVIEW ON THE PRICE OF BUSINESS SHOW, MEDIA PARTNER OF THIS SITE.
Recently Kevin Price, Host of the nationally syndicated Price of Business Show, interviewed Alex Brill.
As of now, the specter of a U.S. government shutdown on October 1 looms large, with potentially far-reaching consequences. This scenario arises from a deadlock between far-right Republicans and other lawmakers, as Congress must pass spending bills for 438 government agencies before the fiscal year concludes on September 30. Failure to do so would leave these agencies unable to function normally.
Historically, there have been 20 such shutdowns since the 1970s. The most recent, in late 2018 and early 2019, was the lengthiest, spanning 35 days, largely due to a dispute over border security. Typically, lawmakers resort to a “continuing resolution” to temporarily extend current funding levels while negotiations continue.
The repercussions of a shutdown would be significant. Hundreds of thousands of federal workers could face furloughs without pay, and a wide array of services, including passport processing and national park maintenance, may be disrupted. “Essential” personnel, while still on duty, would receive no pay, covering crucial functions such as mail delivery, tax collection, and debt payments.
While brief shutdowns may not have immediate, major impacts, prolonged delays in federal employee paychecks could harm the broader economy. Goldman Sachs estimates a direct reduction in GDP growth of about 0.15 percentage points per week of a shutdown. Nevertheless, growth is projected to rebound by a corresponding amount after resolution. The 2018-2019 shutdown cost the economy approximately $3 billion, equivalent to 0.02% of GDP, according to the Congressional Budget Office.
The determination of “essential” roles varies by department and agency. In the 2018-2019 shutdown, roughly 800,000 of the federal government’s 2.2 million employees faced furloughs. For instance, the Department of Homeland Security planned to retain approximately 227,000 of its 253,000 workers on the job, focusing on roles like border security agents and the Coast Guard. The Department of Justice indicated that 85% of its 116,000 employees would be considered essential, emphasizing positions like prison staff and prosecutors.
In past shutdowns, air travel was minimally affected, although the Transportation Security Administration warned of potential increased sick calls from airport security screeners. Whether national parks would remain open is uncertain, as it depends on specific circumstances. In 2013, parks were closed due to safety concerns, while in 2018-2019, they stayed open with limited services. Some states even covered costs to keep their sites operational during that time.
Regrettably, the U.S. House has not taken any action to address this impending shutdown, leaving the situation unresolved and the potential consequences unmitigated.
According to the American Enterprise Institute, “Alex Brill is a resident fellow at the American Enterprise Institute (AEI), where he studies the impact of tax policy on the US economy as well as the fiscal, economic, and political consequences of tax, budget, health care, retirement security, and trade policies. He is the editor of Carbon Tax Policy: A Conservative Dialogue on Pro-Growth Opportunities. Before joining AEI, Brill served as the policy director and chief economist of the House Ways and Means Committee. Previously, he served on the staff of the White House Council of Economic Advisers. He has served on the staff of the President’s Fiscal Commission (Simpson-Bowles) and the Republican Platform Committee (2008). He is also the founder and CEO of the economic consulting firm Matrix Global Advisors (MGA). Brill has an MA in mathematical finance from Boston University and a BA in economics from Tufts University.”
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