Raising the Debt Ceiling

Shut it down! Why a government shutdown costs money

David Gura Sep 25, 2013
HTML EMBED:
COPY
Raising the Debt Ceiling

Shut it down! Why a government shutdown costs money

David Gura Sep 25, 2013
HTML EMBED:
COPY

Today, the U.S. Senate voted 100-0 on the bill to continue funding the government past next Tuesday, when the U.S. government starts the next fiscal year.

Well actually, the vote was to break off debate and start amending a plan to do that, and there won’t be that sort of consensus from here on out, you can be sure. What that means is we are once again facing the possibility of a government shutdown. 

Last time that happened was back in the mid-1990s. Twice. And while those shutdowns were inconvenient — you couldn’t get a passport or visit National Parks they were also costly to taxpayers and the American economy.

We got an estimate of those costs a couple weeks after the second shutdown ended, on Jan. 20, 1996, when President Clinton delivered his weekly radio address.

“Two government shutdowns so far have cost taxpayers about a billion and a half dollars,” he said. “A billion and a half dollars.  That’s not Monopoly money.”

According to Nick Schwellenbach, a senior fiscal policy analyst at the Center for Effective Government, that would be about $2 billion today, if we were to adjust for inflation.

“That’s probably a lowball estimate,” he adds.

During those shutdowns, the U.S. Environmental Protection Agency didn’t assess or collect $60 million worth of fines. Small businesses couldn’t bid on more than a thousand contracts valued at $244 million.

Schwellenbach says that cost estimate doesn’t even begin to include the inefficiencies associated with a government shutdown.

“The leadership of many of these agencies that would rather be spending their time executing their agency’s mission are actually spending a lot of time right now trying to prepare for potential shutdowns.”

Time, which, of course, costs money.

In the 1990s, Ron Haskins, who heads the Brookings Center on Children and Families, was a Republican staffer for the House Ways and Means Committee Subcommittee on Human Resources.

“There are lots of practical implications on people in their normal life, but also on the American economy,” he says.

According to Haskins, a shutdown can affect GDP, and it can also make it harder for the government to hire and keep good workers.

“It’s a lousy way to run a country, to close down the government and create all this uncertainty, plus some very specific costs,” he says.

On top of that, there are costs that are harder to quantify: “opportunity costs.” We are talking about the value of all the time and resources we put into having this debate over and over again.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.