Right-wing media have responded to a potential government shutdown by dismissing the effects a shutdown would have. However, a shutdown could have a “meaningful” effect on the economy, cause thousands of workers to be furloughed, and disrupt numerous public services.
Right-Wing Media Dismiss Effects Of A Government Shutdown
Carlson: “The Public Needs To Be Let In On A Little Secret: We Can Survive” A Government Shutdown. On the March 2 edition of Fox News' Fox & Friends, co-host Gretchen Carlson noted some services that would be affected by a government shutdown and stated: “They've done a study to show that the public needs to be let in on a little secret: We can survive when the government shuts down for a short period of time.” She continued: “And that, I think, would raise a lot of questions about whether or not there's bloating in the federal government.” [Fox News' Fox & Friends, 3/2/11]
Doocy: Shutdown Could Make Americans Realize “They Don't Really Need That Gigantic Mechanism.” Later on the March 2 Fox & Friends, co-host Steve Doocy said to House Majority Leader Eric Cantor (R-VA) that “some Democrats worry that if there was a shutdown that barely affected the everyday lives of a lot of people, that would reinforce your argument on the conservative side that a lot of government is wasteful, and they don't really need that gigantic mechanism.” [Fox & Friends, 3/2/11]
Wash. Times: Government Shutdown “Wouldn't Be A Bad Thing.” In a February 25 editorial, The Washington Times stated that “a shutdown of the non-essential functions of the federal government ... wouldn't be a bad thing.” The Times further wrote that "[s]pending our way out of a recession has been a failure, and the public is ready for change - even if that means living for a few weeks without government functions that, by definition, we can live without." [The Washington Times, 2/25/11]
In Fact, Prolonged Shutdown Could Have “Meaningful” Effect On Economy
Zandi: Economic Effect Of Prolonged Shutdown “Would Be Meaningful.” On March 2, Politico reported:
“If it is a short government shutdown on par with 1995, the fallout would probably be modest,” said Mark Zandi, chief economist at Moody's Analytics. “There will be some economic impact, but it would be quickly made up down the road. But if it were more than a couple of weeks -- if it dragged on for a month -- that would be meaningful, especially in terms of sentiment. People are still very much on edge right now.” [Politico, 3/2/11]
AEI's Swagel: Shutdown “Would Be A Disruption That I Think Would Set Back Our Recovery.” In a February 28 ABC News article, Phillip Swagel, former assistant Treasury secretary and now a visiting scholar at the American Enterprise Institute, said that a shutdown “would be a disruption that I think would set back our recovery.” From the ABC News article:
But a government shutdown could hurt consumer confidence and further roil already volatile financial markets. Some experts say it could even set back economic recovery, especially if prolonged.
The financial and economic impact is likely to be much greater. Stock markets could take a hit, and people are likely to tighten their pocketbooks even further amid increased anxiety.
A shutdown “would matter tremendously but not for the reason of people not getting back their checks issued,” said Phillip Swagel, former assistant Treasury secretary and now a visiting scholar at the American Enterprise Institute. “It impacts consumer spending, business investment. If there's no confidence, people will stop spending, businesses will stop hiring. We have an economy that's fine but it's still pretty fragile. It would be a disruption that I think would set back our recovery.”
Consumer confidence is important because it shows how much faith Americans have in their government.
“It would just show Americans that our government isn't really equipped to come to agreements and really handle the challenges facing the country,” Swagel added. [ABC News, 2/28/11]
Goldman Sachs Report: “A Shutdown Lasting More Than A Week Could Be Meaningful.” ABC News further reported that a recent Goldman Sachs report “estimated that while the potential for a shutdown does not present a major risk, for each week the federal government is closed, federal spending would reduce by around $8 billion, and could reduce real GDP growth by as much as 0.8 percentage point at an annualized rate in the quarter it occurred.” The Goldman Sachs report further stated that a “shutdown lasting more than a week could be meaningful.” [ABC News, 2/28/11, 2/23/11]
Bloomberg: “The Housing Market Could Be Hampered Even Further By A Shutdown.” Bloomberg Businessweek reported that "[t]he housing market could be hampered even further by a shutdown" and noted that in 1995-96, “the government closed the Federal Housing Administration, which insures mortgages, delaying 10,000 home loans that totaled $800 million.” From Bloomberg Businessweek:
The housing market could be hampered even further by a shutdown. In 1995 and 1996, the government closed the Federal Housing Administration, which insures mortgages, delaying 10,000 home loans that totaled $800 million.
The FHA's importance has grown significantly since private mortgage insurers were slammed in the subprime mortgage crisis. The FHA insured about 13 percent of the value of single-family home purchases in the past year, double its market share during the 1995 fiscal year. An FHA spokesman declined to comment on how a shutdown would affect the agency. [Bloomberg Businessweek, 2/24/11]
OMB: 1995-96 Shutdowns Cost Economy About $1.4 Billion. On February 22, Slate reported that the Office of Management and Budget (OMB) estimated that the 1995-1996 government shutdowns - which lasted for a combined 27 days - “cost the economy about $1.4 billion.” [Slate, 2/22/11]
1995-96 Shutdowns Affected Thousands Of Workers, Disrupted Numerous Services
Thousands Of Federal Workers Were Furloughed. Slate reported on February 22: “In the first shutdown, 800,000 workers stopped heading into the office. In the second, about 284,000 stayed at home, with an additional 475,000 working on 'non-pay status.'” U.S. News and World Report noted that while Congress later voted to “pay back federal employees for the time they were furloughed ... [i]t's not clear, in the current political environment, whether lawmakers would make the same decision.” [Slate, 2/22/11; U.S. News and World Report, 2/25/11]
Bloomberg: Shutdowns Caused “11 States And The District Of Columbia To Stop Providing Unemployment Benefits.” Noting the effects of the 1995-96 shutdowns, Bloomberg reported that "[a] shortage of federal funds eventually led 11 states and the District of Columbia to stop providing unemployment benefits when they couldn't or wouldn't fill the gap with their own funds." From Bloomberg Businessweek:
A shortage of federal funds eventually led 11 states and the District of Columbia to stop providing unemployment benefits when they couldn't or wouldn't fill the gap with their own funds. Other benefits were slowed or stopped entirely: Veterans stopped receiving some payments, including insurance death claims and checks for education provided by the GI Bill. Delays hit recipients of federal welfare programs and adoption-assistance services, along with children in foster care and in the Head Start early childhood program. The Bureau of Indian Affairs closed, cutting off assistance payments to 53,000 people, while about 25,000 American Indians also stopped receiving checks for oil and gas royalties. [Bloomberg Businessweek, 2/24/11]
OMB Outlines Effects Of 1995-96 Shutdown On Public Services. In a February 18 report, OMB detailed effects that the 1995-96 shutdowns had on the public, which included disruptions in health, recreations, and veterans services:
- Health. New patients were not accepted into clinical research at the National Institutes of Health (NIH) clinical center; the Centers for Disease Control and Prevention ceased disease surveillance; hotline calls to NIH concerning diseases were not answered; and toxic waste clean-up work at 609 sites reportedly stopped and resulted in 2,400 Superfund workers being sent home.
- Law Enforcement and Public Safety. Delays occurred in the processing of alcohol, tobacco, firearms, and explosives applications by the Bureau of Alcohol, Tobacco, and Firearms; work on more than 3,500 bankruptcy cases reportedly was suspended; cancellation of the recruitment and testing of federal law enforcement officials reportedly occurred, including the hiring of 400 border patrol agents; and delinquent child-support cases were delayed.
- Parks, Museums, and Monuments. Closure of 368 National Park Service sites (loss of 7 million visitors) reportedly occurred, with loss of tourism revenues to local communities; and closure of national museums and monuments (reportedly with an estimated loss of 2 million visitors) occurred.
- Visas and Passports. Approximately 20,000-30,000 applications by foreigners for visas reportedly went unprocessed each day; 200,000 U.S. applications for passports reportedly went unprocessed; and U.S. tourist industries and airlines reportedly sustained millions of dollars in losses.
- American Veterans. Multiple services were curtailed, ranging from health and welfare to finance and travel.
- Federal Contractors. Of $18 billion in Washington, DC, area contracts, $3.7 billion (over 20%) reportedly were affected adversely by the funding lapse; the National Institute of Standards and Technology (NIST) was unable to issue a new standard for lights and lamps that was scheduled to be effective January 1, 1996, possibly resulting in delayed product delivery and lost sales; and employees of federal contractors reportedly were furloughed without pay. [OMB, 2/18/11]
Shutdown Could Disrupt Some Social Security, Tax Services
Shutdown Could Cause Some Delays In Social Security Payments. As U.S. News noted: “If the government shuts down, Social Security payments would probably still go out, but there could be delays and new claims may be not be processed. In the 1995 government shutdown, Social Security eventually recalled more employees to help with the backlog of new applications as the stoppage dragged on.” [U.S. News and World Report, 2/25/11]
U.S. News: “If The IRS Is Forced To Scale Down To A Skeleton Crew, Tax Refunds Could Be Delayed.” U.S. News further reported:
Unlike the 1995 shutdown, this standoff is happening just as Americans are beginning to file their tax returns. If the IRS is forced to scale down to a skeleton crew, tax refunds could be delayed, and the IRS won't be able to help if filers need advice. But just because the IRS is stalled doesn't mean that you won't face a penalty if you fail to file before the April 18 deadline. [U.S. News and World Report, 2/25/11]