Fear the Shutdown

More soft-shoe: horror of horrors – the government might shut down!  Time for a little rational perspective.  Let’s check with Maya MacGuineas, president of the Committee for a Responsible Federal Budget. 

First, perhaps some background.  What is the Committee for a Responsible Federal Budget?

The Committee for a Responsible Federal Budget is a bipartisan, non-profit organization committed to educating the public about issues that have significant fiscal policy impact. The Committee is made up of some of the nation's leading budget experts including many of the past Chairmen and Directors of the Budget Committees, the Congressional Budget Office, the Office of Management and Budget, the Government Accountability Office, and the Federal Reserve Board.

A bunch of insiders.  My hopes for sanity from Maya on this topic decrease.

And who is Maya MacGuineas?

Maya MacGuineas is the President of the Committee for a Responsible Federal Budget. Maya testifies regularly before Congress and has published broadly, including articles in The Atlantic Monthly, The Washington Post, The New York Times, the Financial Times and the Los Angeles Times. Once dubbed “an anti-deficit warrior” by The Wall Street Journal, Maya comments often on broadcast news and is widely cited by the national press. In the spring of 2009 Maya did a stint on The Washington Post editorial board, covering economic and fiscal policy.

“An anti-deficit warrior.”  She sounds like someone who will take a strong stand on this issue.  My hopes increase!

Maya has worked at the Brookings Institution and on Wall Street. As a political independent, she has advised numerous candidates for office from both parties, and works regularly with members of Congress on health, economic, tax, and budget policy. She serves on the boards of a number of national, nonpartisan organizations and received her Master in Public Policy from the John F. Kennedy School of Government at Harvard University.

The Brookings Institute…JFK School of Government at Harvard….  My hopes decrease.  Oh well, we’ve come this far, let’s see what she says.

Maya MacGuineas has been fighting for less debt and more fiscal responsibility in Washington for more than 10 years. So when MacGuineas, president of the Committee for a Responsible Federal Budget, says, "There's a very significant risk" that the government will shut down, there is a very good chance it will. "There is no plan for keeping [the government] funded," she tells The Daily Ticker. "'It's very likely that [Congress] falls into a shutdown even if they don't mean to..."

While I would find this hard to believe…from her lips to God’s ears.

What would be the impact of such a shutdown?

A Big Bill for Taxpayers. A government shutdown won't save taxpayers money but will actually end up costing them more. The last shutdown in late 1995 and early 1996 cost $1.4 billion, which is more than $2 billion in today's dollars, according to MacGuineas. She explains: The government has to develop contingency plans, which costs money and furlough workers, who will likely receive back pay. And then there's the spillover effect of a slowing economy due to less government spending, which ultimately will reduce tax revenues.

Start by not funding the back pay – what about that?

The US government might be about the only entity on earth that could figure out a way to do absolutely nothing for a few months and spend more money than they would have if they continued as is.  Not that I wouldn’t consider this a net benefit, I’m just saying.

Slower & Fewer Mortgage Approvals. The Federal Housing Administration (FHA), which accounts for about a quarter of first-time mortgages, would either not make loans or make a lot less loans if the government shuts down.  "Part of the economic recovery is the housing industry," says MacGuineas, "It's sort of dangerous to think about slowing down housing [by way of] a self-inflicted wound at the very time when we want to make sure that [the housing] market...is continuing to move along and help the economy to grow."

Instead of all of this gobbledygook voodoo economic stuff, why not just form a “Committee for a Responsible Federal Budget” that considers it responsible to get the government out of the mortgage business?  Wouldn’t that be a bit more responsible – to say nothing of Constitutional?  Oh, wait.  I used the “C” word; a failing argument for over 200 years now.

Delays in Passport & Visa Processing. A government shutdown would make it harder for people to leave and to visit the U.S. "The tourism industry can be hit quite hard as can the airline and travel sector," says MacGuineas. In the 1995 shutdown, more than 200,000 passports went unprocessed.

I don’t care about the tourism industry – as there won’t be any customs and border patrol agents working (we are talking about a shutdown, aren’t we?) I won’t need a passport to leave….

(Yeah, I know; I will need one to enter somewhere else.  But I won’t let facts get in the way of making fun of this nonsensical talk about a non-shutdown shutdown.)

Closure of All National Parks. MacGuineas says she still hears stories of disappointment from people who weren't able to visit national parks on their vacations during the last government shutdown. "This is not a critical function" of government, says MacGuineas.

"This is not a critical function."  Wait a minute – are they only talking about shutting down the non-critical functions?  If they aren’t critical, why not just shut them all permanently?  Sooner or later, it is going to come to this anyway.  Perhaps someone should form a “Committee for a Responsible Federal Budget” in order to advocate for the responsibility of such a federal budget action.

Slowdown in Social Security Enrollments. Social Security checks will not be delayed if there's a government shutdown but enrollments will be, at least temporarily, if Social Security workers are furloughed. And that could affect thousands or more since 10,000 baby boomers turn 66 every day and are eligible for full Social Security benefits.

I consider this nothing more than a dry-run for the reality of the future of social security.  Prepare to be disappointed in this scheme one way or another – through inflation, means-testing, delayed retirement age, bounced checks, etc.

That’s it – there is Ms. Maya’s “responsibility.”

Sadly, after spending time writing this post I am struggling to find any point in it.

Kind of like the song-and-dance in this entire let’s-pretend-we-are-discussing-something-important conversation on a potential shutdown of the government.