Claim: As Washington teetered on the budgetary brink, House Speaker John Boehner last week sounded an alarm. “If you shut the government down,” he asserted, “it’ll end up costing more than you’ll save.”
Reality: Boehner is right.
Just because the government turns out the lights, shuts down agencies such as the IRS, closes the gates of national parks, and furloughs 800,000 “nonessential” workers doesn’t mean taxpayers save money. In fact, it could prove more costly than business as usual – adding hundreds of millions of dollars a day to state and national spending.
For one thing, those workers may be entitled to back pay and will be eligible for unemployment. States will have to shell out money ahead of transfers from Washington. Then there’s all the work that will have piled up. When they return, many government employees will have to put in extra time.
A shutdown also can add to the money needed by government agencies, which lose the ability to collect fees on their services. During the government shutdown in 1995, for instance, the national parks lost 7 million visitors, costing the National Park Service an estimated $14 million in tourist revenues. Overall, the Office of Management and Budget estimates the shutdown cost taxpayers around $100 million each day at first – and more than $1 billion after three weeks.
And this isn’t counting a potentially huge impact on the private sector. For instance, some kinds of trading on Wall Street won’t take place.
Bart Chilton, chairman of the U.S. Commodity Futures Trading Commission, said in a statement on Thursday the financial damage from a shutdown would be “potentially incalculable” – and the consequences of less regulatory policing “could be enormous.” His own agency, he warned, was entering “dangerous territory” by making public its contingency plans.
States have worries of their own.
“The largest factor in determining the impact of any federal government shutdown is its length,” notes a February briefing paper by the National Association of State Budget Officers. “While a brief shutdown would be inconvenient, a longer-term shutdown could prove to be significantly problematic.”
While the last shutdown in 1995 lasted only 20 days, Maryland had to come up with an extra $1.4 million in state employee salaries. Federal shares of those salaries had been suspended. The District of Columbia had to spend $4.4 million.
Over the last three decades, the government has shut down 16 times. This report by the Congressional Research Service covers some of the causes and consequences. A Goldman Sachs economist has estimated that a shutdown today would equal $8 billion in weekly spending.
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