Government Shutdown Myths

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My first thought on hearing about the possible government shutdown at the end of this week, when spending authority is scheduled to run out, was relief. Perhaps I won't have to pay my taxes by April 18.

A friend who works in a government agency told me that his co-workers want the government to be shut down. They hope for a few days of "unpaid" furlough because they are confident that when Congress does approve new spending legislation it will vote, as it did in 1995 and in the mid 1980s, to pay them for their time off.

The law permits "essential" employees, such as airport screeners and customs agents on the border to be kept on the job. Those who are told to stay home must suffer the ignominy, if they care, of being branded as nonessential, with some having to give up prized BlackBerries.

Which raises the question-if workers are nonessential, why do they need government-provided BlackBerries?

The administration is trying to make any shutdown as obvious as possible to score political points.

So Washington D.C. may lose trash collection and street sweeping services, even though such services could be continued since they protect property and public safety.

And the National Park Service has announced that it won't honor permits it has distributed for Saturday's Cherry Blossom Parade. The decision could just as well have gone the other way, with organizers hiring private security guards.

The Federal Housing Administration stated that lenders could still approve loans made according to its guidelines, but warned that the mortgage markets may nonetheless be disrupted.

Although many people outside Washington won't notice whether the government is open or closed, one thing is clear-shutting down the government is an inefficient way to deal with the federal spending problem and huge deficit. It is disruptive and won't save money.

As for us taxpayers, returns must be filed by Monday, April 18. The Internal Revenue Service will still, perhaps with a delay, process them, cash our checks, or send out our refunds.

Here's the back-story: The Democrat-controlled 111th Congress failed to pass any of the 12 regular, annual appropriations bills, so the job has been passed to the 112th Congress.

Since fiscal year 2011 began on October 1, the government has limped along on a series of six congressional "continuing resolutions." Historically, these impasses have occurred either because of partisan differences, or because Congress and the White House, although of the same party, could not agree on some of the spending details or authorizations.

In the shutdowns of 1995 and 1985 to 1987, furloughed employees were paid after operations resumed because Congress decided they should not be penalized.

The threat of shutting down the government is a scare tactic, used by the White House and by some in Congress to get spending opponents to cave in. But no one is fooled. Visions of social security checks not being mailed and the beaches not defended from an invader are false.

What are the myths about a government shutdown?

Myth 1: the government ceases to function. In truth, essential services continue, but some functions may stop for a few days.

Myth 2: government employees on layoff don't get paid. Actually, government workers will be paid, after a budget deal is made, if past practice is followed.

Myth 3: Social Security and food stamp payments will stop. Not so. Direct deposits and checks will continue to go out. The Treasury Department has the ability to decide what must be paid, and Social Security checks and food stamp debit cards have been at the top of the list.

Myth 4: Air traffic control, veterans' hospitals, prisons and courts will shut down. No, they continue, because they will be deemed "essential services."

Myth 5: The military shuts down and the country is defenseless. On the contrary, national defense continues. Some troops' pay may be delayed, but it will not be lost.

Myth 6: Congress has decided to shut down the government. Or the president has decided. Depending on exactly what happens, it may be a little of each.

President Obama declared that he would not sign another stop-gap funding measure, but if Congress sends him one amidst progress towards agreeing on spending until fiscal year 2011 ends on September 30, he might relent and sign it. This might be one of those situations where political discretion is the better part of valor.

The Republicans want to cut $61 billion from 2010 fiscal year spending, the year that ended September 30. Democrats have agreed to cut $33 billion, and Speaker Boehner has offered a compromise of $40 billion. As of Wednesday evening, it was unclear whether a compromise would be reached.

The difference between Republicans and Democrats is $28 billion, about three-quarters of one percent of the $3.8 trillion in projected government outlays in 2011.

Perhaps, if a shutdown occurs, we can benefit from it. We could identify non-essential services that could be eliminated permanently in the fiscal 2012 budget bill, or when it is time to raise the debt ceiling later this spring.

One sector ripe for cuts is transportation. The president's 2011 budget allocates $96 billion for transportation -- $62 billion for ground transportation ($34 billion to be raised from Highway Trust Fund motor fuel taxes), $22 billion for air, $10 billion for water, and $1 billion in unspecified spending. Subtracting Highway Trust Fund revenues leaves $62 billion in potential savings.

In the 21st century, the technology exists for transportation users, namely travelers and shippers, to pay the costs of transportation. States could be given responsibility for highway finance and the federal motor fuel taxes could be eliminated.

Instead of operating national parks and museums, the government could lease them to private companies who would maintain and run them for visitors who pay admission fees.

If I have to do my part and file my taxes, which pay these politicians' paychecks, surely they can do their part and decide on a 2011 budget-preferably with more spending cuts.


Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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