Updated January 27, 2019. (The Balance): ‘Government Shutdown 2019, 2018, and 2013 Explained: Why the Government Shut Down and What Happens Next’ By Kimberly Amadeo – the U.S. Economy expert for The Balance. She studied at the Sloan School of Business at M.I.T.
A government shutdown is when non-essential discretionary federal programs close. It occurs when Congress fails to appropriate funds.
In the normal budget process, Congress appropriates funds by September 30 for the following fiscal year. When that doesn’t happen, it enacts a continuing funding resolution. If Congress can’t even agree on that, it forces a shutdown. That signals a complete breakdown in the budget process.
The current shutdown began on December 21, 2018. It became the longest shutdown in U.S. history on January 12, 2019, when it surpassed 22 days. It ended January 25, 2019, at 35 days, when President Donald Trump and Congressional leaders agreed to a stop-gap spending bill.
About 380,000 non-critical employees of nine major agencies were sent home without pay. In mid-January, the Trump administration called 50,000 of them back to work without pay. As the shutdown stretched on, many looked for part-time work to pay bills.
There are 420,000 critical employees who have been reporting to work without pay from the beginning. On January 11, Congress passed a bill to reimburse federal exempt employees for lost wages once the shutdown ends. Contract workers won’t be reimbursed.
Here’s how many workers were furloughed in each department and its economic impact:
- Agriculture – 40 percent of 95,383 workers. Farmers can’t get loans processed. March food stamps could be cut.
- Commerce – 87 percent of 47,896 workers. Reports from the Bureau of Economic Analysis are delayed.
- Homeland Security – 13 percent of 232,860 workers. Companies can’t verify a worker’s immigration status.
- Housing and Urban Development – 95 percent of 7,497 workers. Rental assistance for the elderly and disabled is delayed.
- Interior – 78 percent of 68,469 workers. National Park maintenance has decreased. The department loses $400,000 a day in fees. The Environmental Protection Agency furloughed 95 percent of 13,872 workers.
- Justice – 17 percent of 114,154 workers. Federal civil cases and immigration court cases are delayed. Federal District Courts may stop hearing civil cases beginning January 25.
- State – 42 percent of U.S. workers and 26 percent of U.S. employees posted abroad.
- Treasury – 83 percent of 87,267 workers. Workers are being called back so refunds aren’t delayed.
- Transportation – 34 percent of 54,230 workers. Some security screeners have called in sick. This created delays in some airports.
In addition, many smaller agencies and administrations were shut down. For example, 95 percent of NASA employees were furloughed. It took more than a week to repair the Hubble Space Telescope.
After the first two weeks, the shutdown began affecting economic growth. The Council of Economic Advisers estimated it reduces economic growth by 0.13 percentage points every week the government is closed. Workers and contractors who don’t get paid spend less. Government spending is itself a component of gross domestic product. It contributes 18 percent of economic output.
Trump dug his heels in on January 4, 2019, when he said he wouldn’t approve a budget without a $5.7 billion wall on the border with Mexico. It’s a key piece of Trump’s immigration policy. He believes it’s the only solution to the growing number of migrants applying for asylum at the border since November 2018.
The Democrats believe the money would be better spent on other border security measures. Instead of a wall, they want more funds to target ports of entry, advanced technology for scanning vehicles for drugs, and more immigration judges.
The Republican-controlled Senate submitted a budget that contains wall funding. It added $20 billion for additional border patrol, increased detention facilities, and disaster aid. Senate Democrats submitted a prior House bill that would fund all departments except Homeland Security. It would fund that department through February 8, 2019.
The Senate had passed that bill on December 19, 2018. The Senate wouldn’t vote on the bill when Trump opposed it. When both Senate bills failed, they provided a starting point for negotiations.
As a backup, Trump has considered declaring a national emergency. He could then repurpose existing military spending to build the wall. He may also repurpose fundsfrom the Army Core of Engineers designated for hurricane disaster relief.
On January 19, Trump had offered a new plan that included protection for those under the Deferred Action for Childhood Arrivals program. He would guarantee them a three-year protection from deportation.
Democrats rejected the deal for three reasons. First, the courts already upheld DACA. Second, Trump is offering temporary protection in return for a permanent wall. Third, Democrats want the government reopened before negotiations begin.
Congress could end the shutdown without the president. Technically, any bill approved by both houses of Congress becomes law after 10 days even without the president’s signature. Even if the president vetoes it, Congress could override the veto with a two-thirds majority vote in both houses.
What Led to the Shutdown?
On August 23, 2018, the U.S. Senate approved an $850 billion spending bill for Fiscal Year 2019 that funded the departments of Defense, Labor, Education, and Health and Human Services. On September 18, it passed a short-term spending bill that funded the other departments until December 7. It included $1.6 billion for the border wall. Congress then extended funding until December 21.
On December 11, 2018, Congressional Democrats met with the president. Trump threatened to shut down the government if they didn’t include $5 billion to build the wall. But Democrats said it would be ineffective. They offered $1.3 billion to continue current border-security funding. It includes border fencing, levee walls, and technology but not a steel barrier wall.
On December 18, Trump said he would compromise. On December 19, 2018, the Senate approved an extension of current spending until February 8, 2019.
But then Trump changed course, saying he wouldn’t sign it. On December 20, 2018, the House of Representatives passed a bill that included funding to maintain existing barriers. Senate leaders tried to renegotiate and pass a new spending bill. At 7 p.m. eastern time it became clear that was not going to happen, and the government shut down.
Pros and Cons of the Wall
The U.S. border with Mexico is 2,000 miles long. A third of it already has a wall or fence. Much of that was built thanks to the Secure Fence Act of 2006. It cost $2.3 billion to expand barriers and checkpoints. It reduced immigration by 83,000. The reduced competition increased low-skilled workers’ pay by $0.36 a year.
Erecting a wall on the rest of the border would stop 144,000 immigrants. It would raise incomes of low-skilled workers by 58 cents a year. It would cost $15 per American to build the wall.
But the wall would hurt the economy overall. Incomes of higher-skilled workers would fall by $7.60 a year. The U.S. economy would lose more than $4 billion a year. The same thing happened with the existing wall. Workers with college degrees lost $4.35 annually. As a result, the economy declined by $2.5 billion.
The conservative Heritage Foundation says the money would be better spent on technology and agents to prevent illegal crossings. It advocates more enforcement to apprehend immigrants who overstay their visas.
A Shutdown Also Occurred in January 2018
On January 19, 2018, the government shut down for almost three days. The Senate failed to pass a continuing resolution to extend spending until February 16, 2018. Republicans couldn’t get enough Democrats for the 60 votes needed. The continuing resolution was a stopgap measure to buy time to pass the budget for FY 2018.
Democrats wanted the bill to protect immigrants eligible for Deferred Action for Childhood Arrivals. They were concerned that Trump’s immigration plan would end the program in February. Some Republicans also voted against the bill. They wanted to focus on passing the permanent budget instead of another continuing resolution.
On January 22, Congress ended the shutdown. It passed a continuing resolution that expired at midnight on February 8, 2018. Republicans promised to work with Democrats on DACA legislation.
On February 9, the government shut down again, this time for five and a half hours. Senator Rand Paul objected to the bipartisan two-year spending bill. It added more than $300 billion to the debt.
The bill exceeded the spending caps imposed by sequestration. Republicans increased defense spending by $80 billion a year to $629 billion. Sequestration limited it to $549 billion. Democrats added $60 billion a year for nondefense discretionary spending. That’s above the sequestration limit of $516 billion. The bill included $80 billion in disaster relief and $6 billion to treat opioid addiction. It also included $7 billion to fund community health centers for two years. Tax provisions added $17 billion.
What Happens During a Government Shutdown?
The discretionary budget funds most federal departments. But those that provide essential services are not shut down. Essential services are those that include defense, national safety, and security. Many of these agencies are set up so they can operate for weeks without a funding bill. The Defense Department warned it wouldn’t pay military personnel during a shutdown.
Border Protection and Immigration, air traffic controls, and the Transportation Security Administration remain open. The Justice Department remains open, but gun permits are not be issued during a shutdown. The Postal Service has a separate source of funds, so mail continues to be delivered.
Here are the major departments that shut down:
- Commerce, except National Oceanic and Atmospheric Administration.
- Energy. Functions that oversee the safety of the nation’s nuclear arsenal, dams, and transmission lines remain open.
- Environmental Protection Agency.
- Food and Drug Administration.
- Health and Human Services.
- Housing and Urban Development.
- Interior, including National Parks.
- Internal Revenue Service, except those processing tax returns.
- Labor, including Bureau of Labor Statistics.
- National Institute of Health.
What about Social Security, Medicare, and Medicaid payments? They are part of the mandatory budget. That budget also includes the Troubled Asset Relief Program and the Affordable Care Act. These programs are never shut down because their funding is automatic. They were created by separate Acts of Congress.
Other U.S. Government Shutdown Examples
Here are examples of when the federal government either shut down or narrowly avoided one.
2017. The government avoided a shutdown on April 28, 2017. That’s when the continuing resolution, passed on September 30, 2016, expired. Congress hadn’t allocated funds for the FY 2017 budget, which covered October 1, 2016, to September 30, 2017. The continuing resolution funded the government during the 2016 presidential election and transition. The Senate and House approved the spending bill on May 1, 2017. It appropriated $1.1 trillion in spending.
In March 2017, the Trump administration submitted a request to add $14.6 billion to the FY 2017 budget. It wanted to expand the defense budget by $24.9 billion, Homeland Security by $3 billion, and the Emergency budget by $5.1 billion. Trump asked Congress to cut $10 billion from all other departments. Included in that budget was $1.6 billion for a border wall with Mexico. On August 23, 2017, Trump promised his administration would shut down the government if Congress didn’t include funding for the wall.
Many Republicans oppose the border wall. Those from California, Arizona, New Mexico, and Texas face the most consequences. They say the wall won’t work, especially without added security forces. Others worry about the impact on the environment in their states.
Democrats also oppose the wall. They would prefer to use the funds to keep Obamacare subsidies and the other domestic spending programs. They want to increase programs for opioid addiction and health care for coal miners.
For the continuing resolution to pass, the Trump administration withdrew its request for border wall funding. It also agreed to continue providing Obamacare subsidies.
2013. The government shutdown began on October 1, 2013. The Republican-controlled House submitted a continuing resolution without administrative funds for Obamacare. The Senate rejected the bill and sent one back that included Obamacare. The House ignored that bill. It sent one back that delayed the mandate that everyone should buy health insurance. It also deleted the subsidies for Congress and their staffers. The Senate ignored that bill and the government shut down.
Ironically, the shutdown did not stop the rollout of Obamacare. Eighty-five percent of its funding is part of the mandatory budget, just like Social Security and Medicare. It was already authorized by the Affordable Care Act of 2010. The Department of Health and Human Services had already sent out the funds needed to launch the health insurance exchanges.
Here’s what happened each day of the shutdown:
- October 1. TV news highlight how veterans can’t visit the WWII Memorial and cancer patients can’t take advantage of treatment trials at the National Institute of Health.
- October 2. Republicans submit a funding bill that delays Obamacare for a year.
- October 3. Obama calls on the House to vote on the Senate’s continuing resolution.
- October 4. Boehner considers negotiating a budget proposal that will fund the government and raise the debt ceiling. At the same time, he calls on the Senate to negotiate on Obamacare.
- October 5. The secretary of Defense calls back furloughed civilian workers.
- October 6. The House passes a bill to reimburse furloughed federal employees, even though they aren’t working. But no one gets paid until a funding resolution is passed.
- October 7. Boehner won’t fund the government or raise the debt ceiling unless Democrats agree to cut Medicare, Medicaid, and Obamacare. These mandatory programs aren’t even part of the discretionary budget that is shut down.
- October 8. House Republicans propose a “Supercommittee” to negotiate a budget acceptable to both parties. But House Democrats want the shutdown ended and the debt ceiling raised before establishing such a committee. In addition, Senate Democrats might propose a stand-alone bill to raise the debt ceiling.
- October 9. House Democrats meet with Boehner before meeting with Obama.
- October 10. Boehner and a team of House Republicans meet with Obama. They proposed raising the debt ceiling for six weeks to allow time to negotiate.
- October 11. House Republicans put together a budget in exchange for raising the debt ceiling for six weeks and reopening the government.
- October 12. Talks between Boehner and Obama break down. The Senate creates a plan to force the House to an agreement, as it did during the 2011 debt ceiling crisis and the fiscal cliff crisis.
- October 13. Senate bilateral negotiations continue. Republicans want to extend the debt ceiling for three months, fund the government at current levels for six months, establish a bipartisan Congressional committee to agree on spending cuts to Medicare, delay Obamacare’s tax on medical devices for two years, and give agencies more leeway in implementing sequestration.
- October 14. Senate Democrats want to increase spending by $70 billion on the sequestration cuts that hit in January. They want the debt ceiling raised for a year. Republicans want cuts in Medicare and Obamacare and a three- to six-month extension of the debt ceiling.
- October 15. The House submits its own plan, which has thrown a wrench into the Senate’s negotiations. Neither side of Congress will accept the other’s proposal.
- October 16. The House plan didn’t get the support of Tea Party Republicans, so it was dropped. Speaker Boehner put the Senate plan to a vote, where it passed through Democrat and moderate Republican votes. The president signed it Wednesday night.
- October 17. The bill raised the debt ceiling until February 7, 2014, and reopened the federal government until January 15, 2014. It set up a budget conference committee, led by Senate Budget Chairwoman Patty Murray, D-Wash, and House Budget Committee Chairman Paul Ryan, R-Wisc, to submit a unified budget to the president by December 15, 2013.
The Obama administration reported the shutdown slowed economic growth by 0.2 percent to 0.6 percent. It also cost 120,000 jobs. The government was unable to issue certificates for ships carrying U.S. exports and 200 drilling permits were delayed. Around 850,000 federal employees were furloughed each day.
2011. In April, the Republican-led House and President Obama agreed to $80 billion in spending cuts from the Fiscal Year 2011 budget, averting a shutdown. Most of the cuts were programs that couldn’t spend the funds and would have occurred anyway. In reality, only $38 billion was actually cut.
Republicans gave up an earlier proposal of $61 billion in cuts in non-defense discretionary spending, including cuts to Planned Parenthood. This also allowed Obamacare and the Dodd-Frank Bank Reform Act to remain unscathed. Their cuts would have cost 800,000 jobs. Democrats gave up on $1.7 billion in cuts to defense.
Congress was six months late on approving the FY 2011 budget. It had until September 30 to approve the $3.7 trillion budget for Fiscal Year 2012. Instead, it risked defaulting on the U.S. debt by delaying raising the debt ceiling in August.
1995. The government shut down twice: November 13 to November 19, 1995, and December 5, 1995, to January 6, 1996. Republican Speaker of the House Newt Gingrich won the Republican Party’s 1994 Contract with America. It promised to slash funding and introduce a balanced budget amendment to the Constitution.
But no such amendment passed, so Gingrich went after Democratic President Bill Clinton’s FY 1996 budget. He demanded steep cuts in Medicare, Medicaid, and other non-defense discretionary spending in return for raising the debt ceiling. To keep the United States from defaulting, a continuing resolution bill was passed until November 13. When no budget deal was reached, the government shut down until both sides agreed to balance the budget in seven years.
But they couldn’t agree on which budget items would be cut by the time the resolution ended. The government shut down on December 15. By January 1996, both sides negotiated an agreement that cut some spending and raised some taxes, balancing the budget over the next seven years.