What Is A Government Shutdown?
Government shutdowns occur when resources for government operations are depleted and the government comes to a halt. This can happen for a variety of reasons, from a decrease in revenue to policy disagreements. In the US, shutdowns are mandatory when authorized lawmakers are unable to pass a budget on the set timeline. As a result, many government services come to a complete stop and hundreds of thousands of federal employees are furloughed.
Impacts of Government Shutdowns
When a government shutdown occurs, it affects the lives of citizens, businesses, local communities, and more. Here are a few of the many impacts of a government shutdown:
• Disruption of Government Services – Many government services will be interrupted or suspended during a shutdown. This includes services like air travel, passport services, and court services.
• Delays in Payments – Payments from the government, such as benefit payments and federal grants, will be delayed during a government shutdown.
• Loss of Jobs – During a government shutdown, millions of federal employees are furloughed without pay, creating an immense financial burden on those individuals.
• Loss of Revenue – Businesses that rely on the government for contracts, grants, and other services will lose revenue due to a government shutdown.
• Economic Volatility – A government shutdown can also lead to economic volatility, as investors and consumers are unsure of what will happen in the future.
• Social Unrest – A government shutdown can create social unrest, as citizens may become angry with their government and law enforcement.
What Causes Government Shutdowns?
The most common cause of a government shutdown is when authorizing lawmakers in a particular jurisdiction are unable to agree on a budget. The legislature may not have the financial resources to fully fund the required services or they may not be able to agree on how to prioritise the budget.
In the US, shutdowns are more likely in times of divided government, where one party controls the House of Representatives, and the other controls the Senate. Without the support of both parties, a budget cannot be passed. In addition to budget conflicts, government shutdowns can also occur due to political unrest, or when President orders a shutdown due to a specific issue.
What Is the Cost of a Government Shutdown?
The cost of a government shutdown can be immense, both in terms of tangible costs and intangible costs. Here are a few of the most notable costs of a government shutdown:
• Financial Costs – Government shutdowns give rise to billions of dollars in direct losses to the government. This includes lost tax revenue, lost government services, and the cost of furloughed federal employees.
• Opportunity Costs – Shutdown-related delays can also lead to opportunity costs, as important projects are put on hold and resources are wasted.
• Social Costs – Government shutdowns can also lead to social upheaval and unrest, as citizens become fed up with the government and law enforcement.
• Unintended Consequences – Government shutdowns can also have unintended consequences, such as increased poverty and decreased access to healthcare.
How Are Government Shutdowns Resolved?
Most government shutdowns are resolved when authorizing lawmakers reach a compromise. This usually involves a negotiated budget, or a last-minute congressional agreement. In some cases, shutdowns are resolved when the President authorizes the use of emergency funds.
However, not all shutdowns are resolved. For example, the US government shutdown of 2018 lasted a record-breaking 35 days, and was eventually resolved after President Trump declared a state of emergency.
Government shutdowns can have a devastating impact on citizens, businesses, and government services. They can cause delays in payments, the loss of jobs, the disruption of government services, and the loss of revenue. Government shutdowns are usually caused by budget disagreements between authorizing lawmakers, but they can also be caused by political unrest and the President’s orders. Moreover, the cost of a government shutdown is immense, as it can cost billions of dollars in tangible and intangible costs. However, most government shutdowns are eventually resolved when authorizing lawmakers reach a compromise.
