50+ Lifestyles

What Are the Costs of the Government Shutdown?

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

On the national scene we witnessed a government shutdown in January. As of this writing, threats of another shutdown continue. How does a shutdown affect us as citizens and taxpayers in this great country? The longest government shutdown in U.S. history ended after 35 days on January 25, 2019. A temporary appropriations bill extended funding for shuttered federal agencies to February 15, 2019, while a bipartisan committee negotiated a new spending bill for the Department of Homeland Security. As of this writing, it is uncertain whether an additional shutdown occurred. But let’s look at the impact of a shutdown. The full impact of the shutdown will not be known for months, but official estimates have been released, and it may be helpful to look at the estimated cost to the U.S. economy, as well as the effect of public safety and other government services.

The shutdown began on December 22, 2018, when funding lapsed for nine cabinet-level departments (agriculture, commerce, homeland security, housing and urban development, interior, justice, transportation, treasury, and state) as well as a number of other government agencies.

About 800,000 federal workers in these organizations missed two consecutive paychecks. Some 380,000 of these workers were originally placed on unpaid leave (furlough), while 420,000 were deemed “essential” and required to report to work without pay. As the stoppage progressed, tens of thousands of furloughed workers were ordered back to work without pay.

All federal employees should have received full back pay. But about 1.2 million government contractors had no guarantees and may have lost income permanently. It has been estimated that contractors faced more than $200 million a day in lost or delayed revenue.

Missing paychecks was a hardship for many families and especially difficult on lower-paid essential workers. (Furloughed workers in many states could have applied for unemployment benefits or could have sought other employment opportunities).

The most visible manifestation of this issue was increased absences by Transportation Security Administration (TSA) workers. On January 20, the absentee rate for TSA airport screeners was 10 percent, up from 3.1 percent on a comparable day last year. According to the TSA, many workers took time off for financial reasons, such as an inability to pay for child care or transportation. Increased absences resulted in long lines, delays and gate closures at some airports.

Air traffic controllers, who are better paid, remained on the job without pay and normal support staff. However, on January 25, an increase in absences by controllers temporarily shut down New York’s LaGuardia Airport and led to substantial delays at airports in Newark, Philadelphia and Atlanta. This may have been an impetus to reopen the government later that day.

While essential workers maintained some federal services, furloughed workers left significant gaps. National parks were closed or understaffed resulting in lost revenue, vandalism, and mounting trash. Many federal services were delayed or suspended ranging from food inspections and civil court cases to consumer protection services, rural home loans and federal reports used for everything from projecting the economy to deciding what crops to plant.

The IRS called back 26,000 furloughed workers to process tax refunds, but almost 14,000 of them did not report. The IRS claims to be understaffed under normal circumstances and it may take time to get up to speed, adding to the challenges of processing returns that reflect changes in the new tax law. About $2 billion in tax revenues may have been lost as a result of reduced IRS compliance efforts during the shutdown.

It remains to be seen whether all government agencies will continue to operate with full funding after the February 15 deadline. And what has happened since? The long-term economic costs of shutdowns may be relatively small, but the impact on individuals who fell behind financially or missed out on government services could be significant.

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.