U.S. braces for possible costly government shutdown

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Some national parks and museums could close and airports nationwide might see new disruptions and delays.

And the most pivotal federal aid programs—including those assisting the victims of the deadly wildfires in Maui—could struggle to provide urgently needed support.

On Oct. 1, the U.S. government is set to shut down, unleashing real and wide-ranging financial hardship on American families, workers and businesses. The lapse in funding would mark a fundamental breakdown in an ever-divided, intransigent Washington, D.C., where lawmakers this year have struggled—time and again—to fulfill their most basic fiscal responsibilities.

At the heart of the stalemate are renewed Republican demands for deep federal spending cuts, more than three months after House Speaker Kevin McCarthy (R-Calif.) finalized a deal with President Biden that was supposed to prevent this very brinkmanship. Far-right lawmakers have blocked the House this week from adopting a short-term measure that would sustain federal spending at its existing levels and buy more time for the two parties to work out a longer-term arrangement.

If Congress fails to resolve the impasse by Sept. 30, federal appropriations will expire, bringing many agencies to a halt and forcing the sprawling U.S. government to operate at a mere shell of itself. Anticipating the worst, the Biden administration has started to revise and publish a set of intricate blueprints for how agencies should proceed if funds run dry.

As usual, mail deliveries would continue, and seniors would still receive their Social Security checks, because they are not funded through annual appropriations. But older Americans might not be able to obtain new Medicare cards or address some other issues with their benefits until federal funding resumes.

Some federal inspections that ensure food safety and prevent the release of hazardous chemicals in drinking water would be halted, the Biden administration has warned. Federal research toward cancer cures and other innovative therapies would cease. Some passport offices would close if they are in affected government buildings, potentially snarling some Americans’ plans for international travel.

And with each passing day, Washington would further deplete federal safety-net programs that carry over their unused money from past years. Eventually, the government may not be able to provide some poor families with child care, nutrition assistance, housing vouchers or college financial aid. The longer a shutdown persists, the greater the blow it could ultimately deliver to an economy that has teetered for more than a year on the precipice of recession.

“The solution is very, very simple. Extreme House Republicans need to stop playing political games with people’s lives,” White House press secretary Karine Jean-Pierre told reporters Thursday. “There’s so much at stake here.”

For the moment, Congress continues to barrel toward another fiscal crisis, in a year that already saw the U.S. government almost default on its debt. Far-right Republicans have made clear that they are willing to use pivotal deadlines—and the threat of economic catastrophe—to extract policy concessions from Biden and, at times, pressure leaders of their own party. McCarthy has largely acquiesced to their demands, even directing committees this month to open an impeachment inquiry into Biden to appease restive conservatives.

On Thursday, House lawmakers departed the Capitol with seemingly no resolution in sight, raising the odds that the country is about a week away from what would be the 21st shutdown since 1977, when the U.S. shifted the start of its fiscal year to Oct. 1. The heaviest initial blow would fall on about 2.2 million federal employees, who would not receive pay for as long as appropriations lapse, said Jacqueline Simon, the policy director of the American Federation of Government Employees, the largest union of federal workers.

“Most Americans cannot go without a paycheck on payday,” she said. “The vast majority of our members cannot go even one pay period, let alone two, three, four pay periods, without a paycheck.”

The immediate loss of income would arrive as prices remain elevated from high inflation over the past year, and just before the U.S. government is about to resume requiring borrowers to repay their student loans. Many federal workers would not have to report to their jobs, but the government is likely to deem hundreds of thousands of its employees as “excepted” from the shutdown because they deal with national security or public safety.

Even in a shutdown, the nation’s approximately 1.3 million active-duty troops would also helm their stations without pay. Once federal funding resumes, though, the government is required by law to repay federal employees and military personnel. Federal contractors, however, would not be compensated for missed time.

While the Pentagon retains broad latitude to continue programs in the name of national security, top defense officials in recent days have signaled that a shutdown next month could prove uniquely disruptive—even inhibiting their ability to provide some foreign military aid. That includes the supply of select materiel to Ukraine as it continues to fend off Russia, which some House Republicans oppose.

Appearing Tuesday on Capitol Hill, Mira Resnick, the deputy assistant secretary of state for regional security, stressed that prior shutdowns have left her agency “unable to process new foreign military sales for any partner,” except in emergencies, before imploring lawmakers: “This is something we would like to avoid.”

The lapse in funding could prove just as debilitating for Americans outside of government, especially those who are still recovering from recent wildfires, hurricanes and other natural disasters.

The primary federal fund for disaster recovery has fallen to about $2.4 billion, a level that the Federal Emergency Management Agency has described as unsustainable amid hurricane season. In an ominous sign, FEMA spent more than that—about $2.6 billion—just in the first 30 days after Hurricane Ian struck Florida last year.

Last month, FEMA took the rare step to begin rationing its money, pausing about $1.5 billion in longer-term recovery projects to ensure it has enough cash on hand in the event of a major, deadly crisis, said Deanne Criswell, the agency’s administrator. Asked what might happen if those funds approach zero without new appropriations, Criswell told lawmakers at a hearing Tuesday that the consequences could be dire.

“Given our current state,” she said, the fund balance “would be insufficient to cover all of our ongoing lifesaving operations.”

The most recent interruption in federal funding occurred under President Donald Trump, a 35-day lapse in appropriations beginning in the waning hours of 2018 that marked the longest shutdown in U.S. history. Trump held up government funding into January 2019 in an attempt to force Democrats to fund construction of a wall along the U.S.-Mexican border.

Ultimately, Trump failed to secure the money as part of a deal to reopen the government in January, at which point the shutdown had already incurred great economic cost. That month, a federal budget watchdog estimated the political stalemate had delayed about $18 billion in government spending, while reducing gross domestic product by an estimated $8 billion that quarter and interrupting a vast swath of American life.

Nationally, air passengers at the time saw significant delays: Unpaid for a month, some inspectors at the Transportation Security Administration—the federal agents who check bags and protect flights—stopped coming to work “due to the financial toll of the shutdown,” a trio of top airline union groups said then. Four years later, the National Air Traffic Controllers Association renewed its plea for congressional action, warning Wednesday that the last shutdown imperiled “safety activities that proactively reduce risk,” before adding: “We cannot let history repeat itself.”

The exact economic effects of a shutdown may not be immediately evident, because some of the federal officials who produce and release data about inflation and unemployment might come to a stop as well. But a lapse in funding beyond a few weeks—on top of rising interest rates and other economic turbulence— could result in a “meaningful hit to growth,” predicted Mark Zandi, the chief economist at Moody’s Analytics.

“None of this is any good for the economy,” he said.

Two years after lawmakers approved a bipartisan bill to rejuvenate the economy and improve the country’s infrastructure, a failure to fund the government would leave it temporarily unable to approve some projects to improve the nation’s roads, bridges, pipes, ports and internet connections.

“It hamstrings federal agencies, and there are a lot of them doing infrastructure work,” said Maria Lehman, the president of the American Society of Civil Engineers. “There’s uncertainty on ongoing projects, [and] new projects can’t get underway.”

The U.S. would slow down its efforts to inspect workplaces for safety hazards, according to the White House, while the government would not be able to process new applications for loans to cash-starved small businesses. And federal agencies would face escalating challenges in providing critical economic support to Americans under financial duress.

Roughly 10,000 children would lose access to child care starting in October as a result of disruptions to Head Start, a program that provides grants to care organizations, according to the White House, which released its own estimate of shutdown implications on Wednesday. Without those grants, some of these child care centers would probably shutter, leaving parents struggling to balance family and work obligations.

The loss of funding would worsen what is already expected to be a child-care crisis this fall. Even if Congress does fund the government in time, lawmakers are not expected to renew pandemic-era funding that boosted child-care programs. That could result in the closure of 70,000 child care centers, totaling one in three nationally, starting next month, experts have said.

At the start of any shutdown, the U.S. government could continue to pay out food stamps and other nutrition aid, provide housing vouchers to low-income families and process financial aid for the neediest college students. But federal agencies in recent days have signaled that they may have to dial back this support after October if the shutdown spans weeks or longer.

One of the programs—a food-and-vegetable benefit for women, infants and children known as WIC—might only be able to sustain its operations for a few days if federal appropriations lapse, according to the Agriculture Department. That could put roughly 7 million pregnant and postpartum women, infants and children up to age 5 at risk of benefit cuts that leave them hungry, the agency said Friday.

Some states, which manage WIC benefits, may have leftover funds that allow them to continue providing nutritional support even into a shutdown. But the relief is likely to prove short-lived, since the WIC program already faces a significant budget shortfall, a gap that prompted the Biden administration earlier this month to ask Congress for $1.4 billion in emergency aid.

Sharon Parrott, the president of the left-leaning Center on Budget and Policy Priorities, pointed to the uncertainty as she acknowledged millions of families could be at risk if congressional inaction causes a lengthy government shutdown.

“The longer a shutdown lasts,” she said, “the more problems would emerge.”

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16 thoughts on “U.S. braces for possible costly government shutdown

  1. Remind me why I should vote Republican when their response to not getting their way is reminding me of how my kids behaved when they were toddlers.

    “But the deficit!”

    Sure, pair your spending cuts with a tax increase and I’ll believe you care about the deficit. You had all the levers of government just a few years ago and just blew up the deficit with that power. Otherwise, it’s quite clear that Republicans only care about deficits when there’s a Democratic president.

    Turns out electing a bunch of unserious Republicans more interested in being social media superstars than effective governance has consequences.

  2. Too bad IBJ didn’t poll the Indiana congressional delegation to report where each of them stands on the tactics (antics) of the Freedom Caucus and its demands for a federal shutdown.

  3. Its not the leading that’s at issue. Its governing. The two are not the same. Governing assumes accepting roles in keeping the government running, and debating the future of that government in other than blackmail terms.

  4. Threats of a government shut down is always a scare tactic used to get the other party to budge. It’s more costly to allow a shut down than to just fix the problem. This is ridiculous for both parties when there’s a war in Ukrain that’s funded by the USA but we’re threatened with a shut down. Government as a whole is hypocrisy at its finest.

  5. Both parties are at fault and each is the problem. Democrats have largely controlled one or both chambers of Congress since the 40’s. Spending has continued to grow and grow along with federal intrusion. But, it’s also the fault of American voters for not demanding a workable budget that does not keep running up debt. FWIW, the older I get, the more convinced I become that the sooner you admit there is a problem and reach your rock bottom, the easier it is to actually solve your problem.

    1. Neither side is actually interested in doing anything. They’ve already said they aren’t touching the vast majority of the budget – not Social Security, not Medicare, not the military.

      Everything else is effectively window dressing. Trying to lose weight not by eating better or getting more exercise, but skipping the ketchup on your large fries and parking three spots further from the door.

      Whether it’s Democrats spending more than they take in or Republicans refusing to collect enough to cover obligations, it’s equally bad. But only one party is negotiating like terrorists and threatening to shut down government or default on the debt if they don’t get their way. Like I said elsewhere, as soon as Republicans propose a tax increase to go with their spending cuts, or as soon as they actually care about the deficit at a time other than when a Democrat is the president, I’ll take them seriously.

      I have no idea on earth how anyone can look at the last 20 years of governance and actually think the Republican Party cares one wit about deficits. All they care about is cutting taxes, then crying wolf when there’s not enough money coming in anymore. It’s very easy to fix that problem… they just don’t have the will to do it, and enough suckers still believe in trickle down economics anyway.

    2. “Terrorists” ? Really Joe? By that standard then the UAW is also a terrorist organization, right?
      You sound like a John Jacob follower, fighting Tyrants! and Nazis! I get it. You are a Democrat and everything Republican Bad!
      Don’t call someone a terrorist because of a trivial political view

    3. No, you don’t get it, Chuck.

      What do you call people who behave irrationally, refuse to compromise, are willing to hold innocent people hostage, and don’t care about the consequences of their actions, Chuck?

      Terrorists or toddlers. House Republicans are behaving exactly like John Jacob would. None of it’s trivial at this point.

      They just know that they can’t get their way acting rationally… and they know their way is popular only with a small minority of people. So they have to scare people into being quiet.

      So, yes, they’re terrorists.

  6. Interesting comments about Democrats in power. The ONLY years in which the budget was balanced were during the Clinton Administration. In all other years, didn’t matter who was in the White House, who ran Congress, the debt increased. The Republicans with the aid and comfort of Trump did a number on the budget. The Freedom Caucus isn’t really interested in spending cuts generally; they want to defund certain items, like prosecuting Trump, and allegedly doing something about the border issues. The latter are interesting to many US businesses, as restricting the flow of immigrants from Hispanic countries is driving up the costs of construction and food. Because that’s where roofers come from these days, and the folks who pick and process our food. Hurricane and other losses (fire, tornadoes, etc) will be more expensive because there are fewer crews to do the work, and they know it and so charge more. And the longer people have to rent homes because they can’t be back in their own home, the higher the costs. Higher insurance claim costs, higher premiums. My house had hail damage to siding in March 2021. Nothing to keep us out of the home, but allowed for rain to enter inside the siding, needed repair and required all four sides (coverage for which we had paid higher premium). December 2022, our insurer finally had crews and materials available. One week before Christmas. 21 months after the hail storm.
    Complain all you want about immigrants at the southern border. Citizens and others already here are apparently unwilling to do these jobs. So let them in.
    Really concerned about the debt? Then, as noted elsewhere in this thread, couple budget cuts with tax increases (say, on the corporations which just enjoyed tax cuts under the Trump Republicans and are now generally seeing record profits).

    1. Actually, the only time the administration passed a balanced budget was when BOTH the Senate and House were controlled by Republicans, circa 1994 (with Newt Gingrich and the Contract with America).

      And, many economists will tell you that Corporations do not pay taxes. The people pay the corporation’s taxes anyway, through higher prices.

      The people need to stop asking government to solve problems. In my experience, government does not solve problems. It identifies (if not prolongs) problems.

  7. When was the last time Congress passed the actual legislation compared to grand ideas Congress passed to administrative agencies to write the messy details? Perhaps if the Congressmen had to actually write the laws, they might get back in the habit of being legislators. Another thing they might try is voting without names attached to each vote. As it presently stands, it is a matter of party rules, where a holdout can exchange a vote for pork-barrel, or just a pet peeve. Final thought, Washington rightly became a huge money machine for World War II. So much they gave the excess not needed (that they took from us under penalty of jail) to give to anyone who came begging, from states to foreign countries. If the war is over, why have taxes gone up on the middle class. The old 90% on the uber-rich is gone, as is the 70% estate tax the rich paid. But middle class rates when you factor in the social security tax, which is double paid by employee and employer, plus the income tax itself, plus the state taxes, the middle class is getting a shellacking.

  8. The indenture servants in Congress are beholden to the corporate lobbyist that fills their pockets with the cash they confiscate from our pockets either through taxation or inflation!

    I say shut it down at least we would get what we pay for, NOTHING!

  9. For the 10,000th time. If the elected idiots and their staff forfeited their pay, non-recoverable, you would never hear the phrase “government shut down” again. While we are at it, move their healthcare to the VA plan. IBJ, can you reach out to your Patron Saint Andre and ask him to explain why he and his staff draw pay during a shutdown?

  10. I am done voting for representatives that DO NOT represent the people. I have tired of these tactics and I have tired of both sides of the aisle. I will be moving on to other alternatives. It won’t be my fault anymore.

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