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poorrichardsnews says: What happens when the government "shuts down"? Is it like the weekend when the majority of government offices shut down? Or maybe like a national holiday where pretty much everything haults? Actually no, fewer things actually close during a "shutdown" than during an average Sunday. Essential functions stay open. Air traffic control, military, border patrol, embassies... Social Security and Medicare checks go out. So, what is it we're afraid of? Yosemite won't be open?

» SFB says: Well, let’s see … 40 percent of federal employees (or about 800,000 people) will effectively go without pay, which will have an economic effect due to the sheer number of people affected. And it’s not clear that when the shutdown is over, they’ll get paid retroactively. Federal contractors, however, most certainly won’t get anything after the fact. That’s not a small part of the economy, either—roughly $300 billion is spent by the federal government on contractors each year, which is a huge infusion into the economy. Doing some back-of-the-napkin math—obviously some things will keep running, because they have to—that’s about $821 million per day.

(Military employees will be forced to work, but unless a stopgap is set, they won’t receive pay. To the House’s credit, they’re working on a stopgap for that specific case.) 

As Rep. Rush Holt (D-NJ) notes, unemployment benefit payments to states would be affected, meaning extra financial burdens on the state governments which will have to make up for the deficit caused—and potentially those out of work. You won’t be able to get a passport during this period, and it’s likely that you won’t be able to get a home loan guarantee or a small-business loan from the FHA and the SBA, respectively. And farmers, who receive subsidies from the federal government, wouldn’t get those subsidies.

Veterans benefits felt the pain as well during the 1995 shutdown, and though moves have been made to prevent something similar to that, Holt suggests in his list that vets could still face benefits cuts as a result.

As you point out, National Parks will be closed—and so will the Smithsonian. And good luck getting a tour of the U.S. Capitol during the shutdown. So what, you say? Well, those have ripple effects on the economy. If you can’t go on vacation to the Grand Canyon, you’re probably not going to travel there, and you won’t be spending money there at the privately-owned businesses which depend on the park being open.

The last time the government shut down in 1995, Wonkbook notes an OMB estimate that the federal government lost around $2 billion dollars (in 2013 money). What are the odds we’ll lose more than that this time around? It’s unclear what will happen next, but let’s not downplay the scale of the federal government here and the impact it has on the many parts of the economy. — Ernie @ SFB

September 28, 2013 // 15:49 // 6 months ago
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