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US Government Shutdown

Tuesday, October 01, 2013
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U.S Government goes into shutdown – first time in 17 years…

After failing to sign a budget deal for next year, that offered enough compromise to both parties, (specifically around Patient Protection and Affordable Care Act - or more affectionately known as Obamacare), the U.S government has started it's shutdown process...

Read more on the shutdown here.

Incidentally, as Linda Yueh analyses here, this shutdown is nothing compared to what happens if Congress doesn't raise the so-called "debt ceiling". Then the Treasury estimates that it can only stretch out the money until 17 October. At which point, it could run out of money to pay the interest on US government debt, and the US defaults in a technical sense if it misses an interest payment. Be sure to note that the increase in the debt ceiling is *not* an attempt at a Keynesian stimulus - but rather a requirement to simply pay the interest payments due on *previous* borrowing.

In terms of the economic impact of the shutdown, Goldman Sachs economists have estimated that it could cost as much as $8bn a week, based on the 1995-96 shutdown. Read more analysis on this from the FT here.

·In a government shutdown, essential federal employees will continue working but some services will be halted or delayed.


Around 700,000 government employees would be placed on mandatory unpaid leave. This will put an enormous strain on the many departments which will severely understaffed, and potentially on the personal finances of the furloughed employees. However, following the 1995-1996 shutdowns, all employees who had been furloughed were paid retroactively.

Military employees, including active duty personnel,will not be paid during a shutdown unless Congress takes a separate action to insure that payments are issued. According to Congressman CW Young, who heads the House Defense Appropriations Subcommittee, "All military personnel will continue to serve and accrue pay but will not actually be paid until appropriations are available."

:: All national parks will be closed, along with the Smithsonian museums, including the National Zoo in Washington.

:: Top tourist destinations will also shut down, including the Statue of Liberty and Ellis Island in New York, Independence Hall in Philadelphia, Alcatraz Island near San Francisco and the Washington Monument.

:: The Internal Revenue Service will suspend all audits and taxpayer services, including toll-free help lines, though Americans will still have to file federal tax returns.

:: Federal occupational safety and health inspectors will stop workplace inspections except in cases of imminent danger.

:: About half of the Defense Department's civilian employees will be furloughed - made to take temporary unpaid leave.

:: Programmes for children could shut down, including the Special Supplemental Nutrition Program for Women, Infants and Children.

:: Many borrowers on low to moderate incomes and first-time home buyers seeking government-backed mortgages could face delays.

:: The scientific work of the US Geological Survey will be halted.

:: Rubbish collection in the nation's capital will cease. Unlike in the fifty US states, Washington DC's budget is subject to Congressional approval. Although schools and public transportation will remain open, services such as rubbish collection and parking enforcement will not resume until Congress passes a budget.


:: Mail will still be delivered.

:: Social Security and Medicare benefits will keep coming, but there could be some delays in certain cases. Unemployment benefits will still go out.

:: Most Department of Homeland Security's employees will stay on the job, including uniformed agents and officers at the country's borders and ports of entry.

:: Federal air traffic controllers will remain on the job and security checkpoints at airports will remain open.

:: US embassies and consulates overseas will continue to provide services to American citizens and, in the US, State Department officials will continue processing foreign applications for visas and applications for passports.

:: Federal courts will continue operating normally for about 10 business days after the start of a shutdown. Cases will continue to be heard after then, though some employees who are considered non-essential could be furloughed.

(More on the fact checking on the accusations and stats that are being thrown around about Obamacare here).

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