Government Shutdown Begins, Hundreds of Thousands Could Be Furloughed

Here’s what to expect.

• Blame Game: Republicans and Democrats will blame each other
• Economic reports delayed. No jobs report on Friday assuming no resolution. The BLS is shut down except for one person.
• Centers for Disease Control and Prevention will stop analyzing surveillance data for reportable diseases.
• The Office of Management and Budget has asked agencies to consider reductions in force for employees whose work doesn’t align with the president’s priorities and isn’t funded by other revenue streams. “We can cut large numbers of people,” Trump told reporters on Tuesday.
• House lawmakers aren’t expected to return to Washington until next week and any compromise funding proposal would need their approval. 
• Lawsuits: Two unions representing government workers sued the Trump administration on Tuesday, arguing that plans for mass layoffs during a shutdown are unlawful.
• The Congressional Budget Office estimates as many as 750,000 people could be furloughed
• E-Verify, the government program companies use to verify that their employees are authorized to work in the U.S., will be paused.
• The Social Security Administration will pay benefits.
• Air traffic controllers will work without pay but there could be walk off disruptions and people calling in sick.
• A 2019 law guarantees automatic back pay once the shutdown concludes. Private contractors who work with federal agencies and are furloughed during a shutdown aren’t guaranteed back pay. 
•  The National Park Service aimed to keep roads, trails and memorials generally open. 
• Most ICE employees are considered essential and will continue working, according to recently released contingency plans from the Department of Homeland Security. 
• Active-duty military personnel are considered essential employees and thus are required to work during a government shutdown. 

The above list compiled from the Wall Street Journal.

What Happens to Economic Growth?

The Wall Street Journal addresses that question in How Government Shutdowns Affect the Economy

What happens to federal employees?

Shutdowns typically hit federal employees quickly in the form of furloughs, with pay delayed until the government reopens. An important question for the economy is how many workers are on the sidelines, and for how long. The Office of Management and Budget decides which workers are “excepted” from furlough, which means they are needed for emergency or essential work but are still unpaid.

In the most recent shutdown, which spanned 34 days from the end of 2018 through the start of 2019, 340,000 employees were furloughed, according to the Government Accountability Office. But that was a partial shutdown because Congress had already passed some spending bills, which meant hundreds of thousands of employees could keep working and stay on the federal payrolls.

President Trump’s administration has also threatened mass firings if funding lapses, raising the stakes for a federal workforce already hit by months of workforce reductions, restructurings and rehirings. Senate Minority Leader Chuck Schumer (D., N.Y.) said the OMB plan was an “attempt at intimidation” and questioned whether any firings would hold up in court.

What happens to private businesses?

The 2013 shutdown ultimately cut private-sector job growth by about 120,000 jobs, according to an estimate from the Council of Economic Advisers. Shutdowns can also hit the life-sciences industry through delayed grants and stalled Food and Drug Administration reviews.

What happens to economic growth?

The 34-day partial government shutdown in 2018 and 2019 reduced annualized real gross domestic product growth by 0.4% in the first quarter of 2019, the Congressional Budget Office estimated. A full shutdown could more closely mirror the effects of the 16-day 2013 funding lapse, which lowered annualized growth by as much as 0.6%, the Office of Management and Budget reported.

Economists say the economy generally makes up for any lost growth in a shutdown once the government reopens. In this case, Trump’s threats of mass federal layoffs could leave a more lasting mark by making furloughed employees nervous to spend and, potentially, reducing employment.

It will be interesting to see how many Trump tries to fire and whether it will stick.

Otherwise, those furloughed will get paid (eventually) to do nothing.

On September 28, I asked Will Trump’s Last-Ditch Talks to Avoid Government Shutdown Succeed?

The answer depends on your measure of success. Ultimately, Republicans will cave.

Since the House will not be in session, there will be a shutdown.

So, if that’s your definition of success, there won’t be success. But that’s not my definition of success.

Unfortunately, I highly doubt anything good comes from this.

Senate Majority Leader John Thune appears to be waving the white flag already.

Thune said that a resolution likely will involve an agreement to extend the expiring health-insurance subsidies.

“I think the ACA subsidies will be an issue that will be addressed but I think right now we’ve got to keep the government open so we can do appropriations bills and work on that, with that solution,” said Thune.

Add another $350 billion to the deficit over the next 10 years if the giveaways stop there.