September 25, 2013

A guide to what happens in a government shutdown

By BRAD PLUMER The Washington Post

(Continued from page 2)

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Acadia National Park would be among the parks closed under a government shutdown. Here, tourists wait for the right wave to roll in at Thunder Hole at the park on Mount Desert Island.

Kennebec Journal File Photo / Michael G. Seamans

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A: That's unclear. On the first day of the shutdown, these employees do have to come to their offices to secure various files and make preparations necessary to halt their programs. The last time this happened, Congress later agreed to pay these employees retroactively when the government reopened. But that's completely up to Congress.

Q: Is the government even prepared for a shutdown?

A: Maybe? As mentioned before, the Office of Management and Budget has asked federal agencies to develop contingency plans for a shutdown. But chaos is certainly possible. Back during the 1995 shutdown, the Social Security Administration initially sent home far too many workers and had to recall 50,000 of them after three days in order to carry out its legal duties.

Q: Which parts of the economy would be most affected by a shutdown?

A: In a research note earlier this week, Chris Krueger of Guggenheim Partners passed along some thoughts about the possible economic impacts of a shutdown in a few areas:

Tourism: U.S. tourist industries and airlines reportedly sustained millions of dollars in losses during the 1995 and 1996 shutdowns, in part because foreign visas were going unprocessed and in part because so many parks were shutting down. The passport and visa holdup can also disrupt business trips, both here and abroad.

Federal contractors: Of the $18 billion in federal contracts in the D.C. area back in 1995-1996, about one-fifth, or $3.7 billion, were put on hold during the shutdown. Employees of contractors were reportedly furloughed without pay.

Energy: The federal government would have to take a break from working on drilling permits and processing applications for liquefied natural gas exports.

Pharma and biotech: This one's hard to game out. The Food and Drug Administration didn't have to shut down in 1995 and 1996 because it was already funded. This time around, however, the FDA won't be spared, and the review process for new drugs might get bogged down. The shutdown could also put a cramp on the grant process from the National Institutes of Health. "If prolonged," Krueger writes, "that could negatively impact life sciences/diagnostics companies.

Q: Would a government shutdown stop Obamacare from happening?

A: Nope. The key parts of Obamacare rely on mandatory spending that isn't affected by a shutdown. "That includes the new online marketplaces, known as exchanges, where uninsured people will be able to shop for coverage. The Medicaid expansion is funded with mandatory funding, as are the billions in federal tax credits to help with purchasing coverage." The government would continue to set these up.

Q: How do you end a government shutdown?

A: Congress needs to pass a bill (or bills) to fund the government, and the White House has to sign them. They can do this at any time. Or they can sit at home and keep the government closed. Nothing requires them to do anything. It depends what sort of political pressure they're facing.

Q: How often has the government shut down before?

A: Since 1976, there have been 17 different government shutdowns. The longest came in 1995-1996 and lasted 21 days, as Bill Clinton wrangled with congressional Republicans over budget matters. But there were six shutdowns in the 1970s, all lasting longer than eight days, and there was even a one-day shutdown in 1982 when Congress couldn't agree on funding for Nicaraguan Contras.

Q: Is a government shutdown the same thing as breaching the debt ceiling?

A: Nope! Different type of crisis. In a government shutdown, the federal government is not allowed to make any new spending commitments (save for all the exceptions noted above).

By contrast, if we hit the debt-ceiling then the Treasury Department won't be able to borrow money to pay for spending that Congress has already approved. In that case, either Congress will have to lift the debt ceiling or the federal government will have to default on some of its bills, possibly including payments to bondholders. That could trigger big disruptions in the financial markets – or a long-term rise in borrowing costs.

The Bipartisan Policy Center estimates that we're on pace to breach the debt ceiling sometime between Oct. 18 and Nov. 5. So if a government shutdown isn't thrilling enough for you, good news: There's another fiscal crisis just around the corner.

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