13 ways a government shutdown could hurt you

If it happens at midnight Friday, expect financial markets to be rattled, agencies to be ill-prepared and the public to be inconvenienced.

By MSN Money Partner Apr 6, 2011 9:11AM

Government Shutdown from The Fiscal Times on MSN MoneyGovernment Shutdown: Image: Washington, D.C. (© Radius Images/Jupiterimages)By Maureen Mackey, The Fiscal Times


In an appearance in the White House briefing room Tuesday, President Barack Obama urged congressional leaders on both sides of the aisle to resolve their differences over a budget deal that would avert a government shutdown. But as the possibility of a shutdown by the end of this week moves into sharper focus with each passing hour, all eyes are on the ways it would hurt Americans.


In 1995, when funding for the government expired, nonessential services came to a halt. National parks were shut down, museums were closed, and passport processing was delayed. Even the National Weather Service cut back on its regular reports. But the catch, this time as then, is that there are no hard-and-fast rules on what is considered essential versus nonessential. In coordination with the Office of Management and Budget, the president has broad discretion over which departments and agencies should be kept open, making it difficult to quantify how much it would cost the government -- and how it would affect the public -- if a shutdown were to happen.


"Although a government shutdown would be disruptive, the impact will depend on the duration and the degree, on how tight or loose the exceptions are," Patrick O'Keefe, the director of economic research at J. H. Cohn and a former deputy assistant secretary in the Department of Labor, told The Fiscal Times. "But the bigger impact is its demonstration of political impasse regarding the country's unsustainable fiscal posture. The financial market implications of such an impasse should not be underestimated."


"I don't think there is a full appreciation of the impact of a shutdown on the bottom line of government," said Max Stier, the president and CEO at the Partnership for Public Service, a nonpartisan think tank. "Most agencies are ill-prepared for the disruption."


Last week, a significant majority of Washington budget and policy experts surveyed by The Fiscal Times said they expect a government shutdown of at least a few days after the latest stop-gap spending measure expires. The government has been operating under a series of fiscal 2011 continuing resolutions for the past six months, and unless President Obama, GOP congressional leaders and top Senate Democrats can cut a deal for the rest of the year, the shutdown may become a reality beginning midnight Friday.


There's no question it would inconvenience the public in ways large and small. Consider some of the impacts of the three-week shutdown in 1995-1996 -- all of which could be repeated this time around:

  1. New patients were no longer accepted into clinical research at the National Institutes of Health. In addition, NIH disease hot lines and CDC disease surveillance were stopped.
  2. Work on more than 3,500 bankruptcy cases in the federal court system was suspended. 
  3. Hundreds of thousands of "nonessential" federal workers were furloughed for three weeks, from mid-December 1995 to early January of 1996. (Some of those workers eventually received back pay for their missed days.) 
  4. Of $18 billion in Washington, D.C.-area federal contracts, $3.7 billion (more than 20%) were affected adversely by the funding lapse.
  5. The National Park Service closed 368 sites, for a loss of 7 million visitors. The National Park Service administers 84.4 million acres of federal land in 49 states and other federal territories. Since 2008, park visits have totaled 285 million annually.
  6. National museums and monuments closed, including the Smithsonian and other government buildings, with an estimated loss of about 2 million visitors.
  7. More than 600 toxic waste dump sites went untended and uncleaned during the last shutdown. About 2,400 Superfund employees did not work.
  8. The recruiting and testing of new law enforcement officials -- including 400 Border Patrol agents -- were suspended.
  9. During the last shutdown, 20,000 to 30,000 applications for visas by foreigners went unprocessed each day, along with 200,000 applications for U.S. passports. Airlines also suffered, as many prospective travelers were unable to fly.
  10. The Department of Veterans Affairs had to cut many of its services -- including health care, welfare, travel and finance -- as the department could not process compensation claims.
  11. The shutdown meant a delay in processing alcohol, tobacco, firearms and explosives applications by the Bureau of Alcohol, Tobacco and Firearms.
  12. The National Weather Service did not produce its regular reports.
  13. New Social Security claims were not processed, because the agency furloughed more than 61,000 employees. As the shutdown continued, the agency regrouped, recalling workers to start processing new claims again.

It's clear that government shutdowns can be nasty business: They have required the cessation or the reduction of government activities and affected all sectors of the economy, according to a report by the Congressional Research Service.


Former House Speaker Newt Gingrich was one of the architects of the 1995 government shutdown, which lasted 21 days. It was settled when President Bill Clinton submitted a budget that proposed to eliminate the federal deficit in seven years, according to Time magazine.


The issues that were presented then and ultimately triggered the shutdown were the same as today's, according to June O'Neill, who was the CBO director. Congress couldn't agree on a budget resolution for the coming year and was haggling over whether to raise the debt ceiling, she said. The economy was also recovering from the 1991 recession, and growth was sluggish -- similar to today. "There was a great deal of posturing then as there is now," O'Neill said. "The world would come to an end if the debt ceiling wasn't raised."


But in 1995, it was more about Gingrich proving he was just as powerful as the Clinton administration, she says. Even though the government faces a larger deficit and there are divisions on spending cuts, it's not about the politicians today.


Tuesday afternoon, House Speaker John Boehner and Senate Majority Leader Harry Reid tried to reach a budget deal during a Capitol Hill meeting. The meeting lasted less than an hour, but the two men "agreed to continue working on a budget solution," spokesmen for the two said in separate statements.


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