At this point, a government shutdown looks inevitable.
Funding for government services runs out on March 4, and while both parties want to pass a short-term budget bill that will keep things running until a more permanent solution is negotiated, House Republicans are using their new majority to demand huge budget cuts from Democrats. On Saturday, the House passed a seven-month temporary funding resolution that would cut $60 billion from the existing federal budget.
The House GOP plan would impose sharp reductions on virtually every area of discretionary spending (except, of course, on defense). As the Center on Budget and Policy Priorities pointed out in an analysis of the resolution, total funding for non-military programs would have to fall by nearly 24 percent to reduce spending by the proposed amount. If passed, the Republican cuts would slash Head Start services for 157,000 "at risk" children, reduce Pell grants for 9 million students, cut $26 million from community mental-health services, and reduce funding for the Special Supplemental Nutrition Program for Women, Infants and Children (otherwise known as WIC) by $752 million, literally taking food from low-income women and children.
Naturally, Democrats are pushing back against the Republican plan. Senate Democrats declared the bill a nonstarter, and the White House went so far as to issue a veto threat. But as much as they may oppose the deep cuts to government services, Democrats have offered to negotiate some cuts in return for a funding resolution. In a measured statement, Senate Majority Leader Harry Reid said, "Democrats believe we should make smart cuts -- cuts that target waste and excess, not slash the programs that keep us safe and keep the economy growing."
But congressional Republicans aren't likely to budge on their maximalist position -- the Tea Party caucus is too large and too influential to accept anything less than full cuts -- and this makes a shutdown very likely. Indeed, the right-wing Republican Study Committee, which represents many of the new Tea Party members, pushed for an additional $22 billion in cuts, on top of the original $60 billion package. As House Speaker John Boehner said in a press release following the vote, "We will not stop here in our efforts to cut spending, not when we're broke and Washington's spending binge is making it harder to create jobs."
Given where the budget debate seems to be headed, it's worth looking at what happened the last time the government shut down.
The last government shutdown took place in 1995 after Newt Gingrich took command of the House and demanded similarly expansive cuts from Bill Clinton. It lasted 20 days and was, by all accounts, devastating. According to a 2004 report by the Government Accounting Office, it forced the furloughing of several hundred thousand federal employees and affected all sectors of the economy. Forty percent of all federal activities came to an immediate halt, and in total, the shutdown cost taxpayers an estimated $800 million. What's more, a 2003 report by the Congressional Research Service detailed further damage: Toxic waste cleanup work at 609 sites stopped; national parks closed; airlines and U.S. tourist industries sustained millions of dollars in losses; veteran services were curtailed; and the Centers for Disease Control and Prevention ceased disease surveillance.
Given the weak economy, there's reason to think the effects of a shutdown would be much worse this time around. In a sustained shutdown, international and domestic investors could lose confidence in U.S. Treasury bonds. Indeed, then-Treasury Secretary Robert Rubin warned as much in 1995, when the threatened shutdown also brought the possibility of default. As he told The New York Times, "Even the appearance of default can have adverse consequences. ... A sovereign country's credit-worthiness is a precious asset not to be sacrificed under any circumstances."
Moreover, as was the case in 1995, millions of Americans would quickly face income insecurity, as seniors wouldn't receive their Social Security checks, jobless workers wouldn't receive their unemployment benefits, doctors wouldn't receive Medicare payments, and states wouldn't be reimbursed for Medicaid costs. Federal contractors wouldn't be paid for work, and businesses that rely on federal employees for daily traffic -- like restaurants, for example -- would be left without.
This was damaging enough in 1995, when the economy was in the middle of an unprecedented expansion. Today, with slow growth and double-digit unemployment, it would be catastrophic. Social Security alone, according to the Center on Budget and Policy Priorities, keeps 20 million Americans out of poverty, including 13 million seniors and 1 million children. Eighteen million low-income households rely on food stamps for adequate nutrition, and more than 4 million jobless Americans collect unemployment insurance. A government shutdown would cause immediate pain for these Americans and compound the damage of the recession.
Compared to 1995, today's GOP is far more anti-government and far more ideological than it was under Gingrich. These Republicans support deep spending cuts as a matter of conviction and appear willing to shutdown the government over their vision. With that in mind, it's worth noting how this ended for Gingrich and his Republicans. President Clinton refused to back down -- to conservative chagrin -- and the huge public outcry forced Republicans to compromise. The standoff severely damaged the GOP's credibility with the public and was partly responsible for Clinton's re-election in 1996. If we have to relive a government shutdown, then let's hope that history repeats itself for Barack Obama.
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