Thomas Sargent and Cutting the deficit

Federal Budget: Some Shutdown History

Oct 2, 2013 • 470 Views
EST. TIME TO READ: 2 minutes

“Those who disburse the money are like a saucy boy who knows his grandfather will gratify him, and overturns the sum allowed him at pleasure.”

Rep. John Randolph of Virginia, 1806, referring to the executive branch (the saucy boy) and the Congress.

 

Before 1980, whenever the President and the Congress disagreed about the federal budget, the government remained open. Yes, agencies had not formally received their yearly appropriations. However, knowing they would get their money sometime, the funding gap was ignored.

President Carter was concerned though, that the government was functioning illegally. His Attorney General responded that there is no “gray area.” According to the Antideficiency Act that was first passed in 1884 and then amended, the Congress has to appropriate money for the government to spend it. “Either the legal authority to spend exists or it does not exist.” If a federal agency depended by law on the yearly allocation of funding, it could not spend what had not yet been promised.

During the 1980s and after, what had once been ignored funding gaps became a series of partial shutdowns:

From: Businessinsider.com

From: CRS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the Reagan administration, there were 8 shutdowns. The big one, though, for 26 full days, was in 1995-1996 when Bill Clinton was President. It actually unfolded in 2 parts, first from November 13-19 and then from December 15-January 6.

For all of these shutdowns, the cost is tough to measure. We can say, for example, that 401 national parks and tourism sites like historic homes, battlefields and monuments have been closed. The fees ($450,000 a day) that the government loses are quantifiable. But also airlines, hotels, restaurants and even wedding planners lose business. Located across the US and in Samoa and other territories, 87% of their employees–more than 21,000 park staff members will be furloughed.

Slightly different but still difficult to assess, a delayed statistical report also has a cost. During the 1995-1996 shutdown, the December employment report was not issued until mid-January.  I suspect we will not be seeing the jobs numbers on Friday.

That takes us to the economic definition of cost. More than money, cost is what you sacrifice when you make a decision.

Your opinion: Beyond money, what do you think is the biggest cost of the partial shutdown?

Sources and resources: Bloomberg told the story of the Antideficiency Act while this article gave more of a shutdown overview. Then, this report tells about the national parks impact and for many more shutdown facts Businessinsider has an assortment of graphs. Finally, for a drier but definitively accurate perspective, reports like this one from the Congressional Research Service are excellent.

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