The Cost Of Government Shutdowns

On February 19, 2011, I wrote in a post here entitled The Effect Of The Upcoming Government Shutdown On Social Security the following:

Figures provided by the Clinton Administration for the first, six day, shutdown show how much it cost, which was “$700 – $800 million including $400 million to furloughed federal employees who were paid, but did not report to work. The Treasury Department reported another $400 million in lost revenue over the four days that the IRS enforcement divisions were closed.” One can extrapolate from this that the second shutdown cost about three times as much, or $2.1 to $2.4 billion dollars, and that the Treasury Department lost about $1.2 billion in revenue. That is a lot of money for Republican grandstanding, and it ended Newt Gingrich’s career (and helped cost Bob Dole the Presidency in 1996.)

According to an MSNBC article (The cost of keeping the government’s lights off), published February 24, the Office of Management and Budget estimated early in 1996 that the first of two government shutdowns – for six days in November 1995 – cost taxpayers an estimated $100 million per day. The final price tag for that closing and the record three-week shutdown later that year – including back pay to workers who did not go to work over that time: Over $1.25 billion. [This is lower than my extrapolation based on the Clinton Administration figures, but still a significant amount of money for Republican grandstanding.]

[One reason for the difference may be that the second, longer shutdown apparently included fewer employees.] In the 1995-96 shutdowns, the 800,000 employees who were furloughed in November and the 260,000 who sat idle in December received a total of about $1 billion in back pay even though they could not report to work.

Other shutdowns have been costly too. According to the Government Accountability Office, a shutdown of just three days in 1991 rang up a $607 million bill, including $363 million in lost revenue and fees.

The fact that Federal workers were paid at all was a victory won by Federal employee unions after previous shutdowns. They sued the Federal government and won. There had been several brief shutdowns which occurred under Presidents Reagan and G. H. W. Bush. Employees were furloughed for a day or two, but were paid for it under existing rules. The Bush administration decided they did not want to pay furloughed employees in the event of another furlough. When the September, 1991, shutdown was looming, the administration required all employees who were subject to furlough to sign a document ahead of time in which they waived their right to payment of salary in the event of their furlough. At this point one or more Federal employee unions sued. They prevailed in court.

The court ruled that the existing policy, which specified that whenever an employee showed up for work in good faith, and was sent home for reasons beyond his control, he was to be placed on administrative leave and paid for the time he was absent, applied to furloughs. This is same rule which applies if an employee is sent home for other reasons beyond his control, such as natural disasters. If the Federal employee unions hadn’t fought for this, hadn’t taken it to court and won, Federal employees wouldn’t have this guarantee that they would be paid for time they are used as a political football by Republicans. It is to protect against this sort of thing that we need to support the unions now. Not just the public sector unions like the ones under attack by the Republican Governor of Wisconsin, but all unions. They are all that stands between the American people and complete takeover of our government at all levels by huge corporations and their money.

There were other costs aside from paying Federal employees who had been sent home. There were also uncollected fees and fines, and other revenues. Businesses which depended on Federal government operations to attract business to themselves and Federal contractors also lost money. Continuing from the MSNBC article:

Shortly after the three-week shutdown in 1995, the Interior Department concluded that the shuttering of national parks had cost related businesses and nearby local governments almost $300 million. A study conducted by the by National Parks and Conservation Association found that even a year after the [shutdown] small businesses were still suffering from a lingering decline in tourism, especially by foreign visitors.

Contractors also suffered during the [1995-1996] shutdowns. According to a survey…a third of federal contractors furloughed some of their own employees in January 1996. Many of those workers never received checks from their private-sector employers to make up for time lost.

The Environmental Protection Agency…failed to collect $63 million in fines because of cancelled facility inspections during the November shutdown in 1995. Uncollected airline taxes and fees by users of government facilities like national parks also added up.

At a press conference a few days ago, Republican House Speaker Boehner said, “I am not going to move any kind of short-term [continuing resolution] at current levels. When we say we’re going to cut spending, read my lips: We are going to cut spending.” As he left the lectern, he was heard those close by to say, “I can’t believe I just said that.”

Today (February 25), the Los Angeles Times, in an article (House GOP backs off slightly in new funding offer) reported that “House Republican leaders unveiled a short-term stop-gap spending measure that retreats from some of their top political priorities, such as defunding President Obama’s health care law, in the hope of averting a government shutdown by next weekend. Democratic leaders in the Senate saw the proposal as a step toward a possible compromise.

Both sides have been working behind the scenes as Congress tries to resolve a budget impasse before current spending expires next Friday.”

The current Republican budget proposal includes $61 billion in administrative costs, covering the rest of the fiscal year, a period of about thirty weeks. That averages out to about $2 billion per week. The continuing resolution the Republican House is now proposing, which the Senate Democrats see as “step toward a possible compromise,” lasts for just two weeks. It includes budget cuts of $4 billion to be applied to expenditures made during those two weeks. This is exactly the same rate as the budget proposal itself. It seems to me that the Republicans are offering very little, and the Democrats are jumping at it. This is the same old story.

If the Social Security Administration gets stuck with the budget that the House Republicans want for it, they will have to make severe operational cuts. One proposal I have seen is to furlough every employee in SSA for about 20 days. These would be scheduled furloughs, so the employees would not be paid for these days. I’m sure the days would be staggered, so facilities wouldn’t close, but the staffing shortage would be very noticeable. There are about 155 work days left in the fiscal year. If everyone loses 20 of them, this is the equivalent of about a 13% cut in staff. I am sure that the SSA cuts are in the continuing resolution, and will remain in the budget, whatever shape it is finally hammered into.

On Thursday night, Eugene Robinson was on Rachel Maddow’s show. She had discussed a confidential memo from Goldman Sachs to one of its customers about the impact on the economy of the Republican budget proposal. Someone had leaked it to the press. They felt that it would reduce the Gross Domestic Product (GDP) by about 2%, a serious drop. This is enough to wipe out most of the projected increase in GDP, which I have seen extimated to otherwise be in the 2% to 3% range. Rachel mentioned another commentator who thought that this was “huge” news and should be leading every newscast in America. She asked Gene what he thought of this.

He answered, “I think it’s a huge deal, for a couple of reasons. Number 1, it shows how economically insane the Republicans…the House plan is, to take two points off the top of economic growth at a time we’re trying to struggle out of the deepest recession since the Great Depression, is insanity, any economist will tell you it’s insanity, and so now we have Goldman Sachs, which cannot be accused of being some front for international communism or socialism, or Kenyan anti-colonialism, saying the same thing, that this is crazy. Number 2, you know, maybe this is the point of the House budget plan. Maybe the point of the plan is to depress economic growth, to set up the Republican party for 2012, so people will be angry with President Obama and maybe elect a Republican. So I think this should be a huge deal.”

It cannot be said any better than that. Thank you, Rachel, for this segment. It was huge.

This entry was posted in History Of Social Security, Political Events Affecting Social Security. Bookmark the permalink.

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