Impact of a Federal Shutdown

As a politically divided Congress continues to struggle with a federal budget compromise, the specter of a federal government shutdown looms. So what would it mean, especially to Oregon?

A government shutdown would impact most Americans in some shape or form, but federal employees would certainly feel the most acute and immediate pain. In Oregon alone, there are approximately 30,000 federal employees. With Oregon's unemployment rate still above the national average, any government shutdown could throttle an already wheezing economic recovery here.

Federal Workers. During a shutdown, nonessential federal employees may be furloughed. Out of the 30,000 federal employees in Oregon, the Postal Service employs 8,161, the Department of Agriculture, which includes the Forest Service and Bureau of Land Management, 5,558 employees, and the Department of Defense 4,281 employees.

To put the effect of a government shutdown into perspective, during the last federal shutdown, 284,000 federal employees were furloughed nationwide. Another 475,000 federal employees continued to work in non-pay status. Those workers received retroactive pay. There is no guarantee workers furlough or placed on non-pay status now would get back pay.

Federal programs. Under the Anti-deficiency Act, federal agencies and programs must cease operations, except in emergency situations. Government programs funded by laws other than annual appropriations, such as Social Security, may be affected by a shutdown.

During the 1996 shutdown, the Social Security Administration’s inability to pay for some employees’ salaries eventually impinged on processing and payment of new entitlement claims.

A recent report conducted by the Congressional Research Service outlines federal services impacted during the 1995 and 1996 shutdowns. Here is a snapshot of the services affected:

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. This is because the NIH and the Centers for Disease Control and Prevention are funded through discretionary funds.

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 was suspended; cancellation of the recruitment and testing of federal law enforcement officials occurred, including the hiring of 400 border patrol agents; and delinquent child-support cases were delayed.

Parks, Museums and Monuments: Oregon has nine national parks and monuments. In 1995 and 1996 shutdowns, closures of 368 National Park Service sites resulted in the loss of 7 million visitors, with reduced tourism revenues to local communities; closure of national museums and monuments resulted in the loss of another 2 million visitors.

Visas and Passports: Approximately 20,000-30,000 applications by foreigners for visas went unprocessed each day; 200,000 U.S. applications for passports went unprocessed; and U.S. tourist industries and airlines as a result 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 (more than 20 percent) were affected adversely by the funding lapse, as employees of federal contractors were furloughed without pay.

The new date for a potential shutdown is April 10. Sometime between April 15 and May 3t, the U.S. government will bump up against hit its current debt ceiling.

If Congress is unable to reach a long-term compromise to fund the government for the rest of the fiscal year, Congress may be forced to consider both issues simultaneously, a very tricky political scenario, especially for the Republican-controlled House.

That scenario could test political ideologies and campaign promises by going to the cliff on a federal government shutdown and the prospect of defaulting on federal debts.

And that doesn’t take into account the potential impact on a stuttering economy already facing the inflationary shock of rising oil prices in the face of growing unrest in the Middle East and North Africa.