What the Shutdown Means for Some Government Agencies

October 1, 2013
By Jenny Li Fowler, HKS Communications

Without a spending plan in place for the new fiscal year, the U.S. federal government is in “shutdown” mode. That means approximately 820,000 people, or roughly 28 percent of the federal workforce, will be furloughed.

Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy, explains what this could mean for some government agencies and how federal government shutdowns might be avoided in the future.

Q:
Hundreds of thousands of government workers are to be furloughed immediately and up to a million others are being asked to work without pay. How are these decisions made as to which workers are expendable and which are not?

Bilmes: Federal agencies decide which employees to furlough and which to keep on the job during a government shutdown based on the mission of the agency and how it is funded. Employees who are deemed to be “performing emergency work involving the safety of human life or the protection of property or performing certain other types of excepted work” are not affected. This includes, for example, federal employees conducting food safety inspections, air traffic controllers and federal prison guards.

In many agencies, senior staff have spent the past few weeks deciding who is deemed “essential” under the law – for example, the National Institutes of Health (NIH) is retaining employees who care for its 1.3 million mice and 63,000 rats, but the NIH scientists who study autism and Alzheimer’s are being furloughed.

Members of Congress are allowed to choose which of their own staff members would stay on – no surprise there.

Q: How do federal departments operate without budgets? Which agencies are hardest hit?

Bilmes: This year, Congress hasn’t enacted a single one of the 12 major appropriations bills that fund government operations, so any agency that doesn’t have funding lined up will be very hard hit. Programs with their own funding streams, such as the Postal Service, Social Security and passport applications are not included in the shutdown. The Department of Veterans Affairs, which receives advance appropriations, will be able to keep more than 90 percent of its workforce working.

But the vast majority of employees at the IRS, the Environmental Protection Agency, the Housing and Urban Development Department, the National Institutes of Health and some 400,000 civilian Pentagon employees will all be forced to stay home. There are consequences that can’t be easily foreseen – for example, the National Park Service does more than keep Yosemite Park open – it also protects the watershed in many parts of the country and maintains thousands of roads, dams, bridges and other infrastructure. This will all come to a halt.

Q: A previous government shutdown during the Clinton Administration lasted 28 days and resulted in billions of dollars in spending cuts, impacting all sectors of the economy. Do you foresee similar results this time?

Bilmes: The shutdowns in 1995-96 were quite different in several respects. First, the motivation for the Republicans was to reduce the deficit, so the tactic of shutting down government spending was arguably connected to the goal vs. today the motivation is to delay an already-enacted law (Obamacare) that was approved by the Supreme Court. So there is no rationale for shutting down the government.

Second, in 1995-96 most Republicans were united behind a fiery, charismatic leader (House Speaker Newt Gingrich), whereas today Republicans are deeply divided and the current Speaker, John Boehner, seems to have lost control of events.

Third, the economy in 1995-96 was booming and was able to withstand the impact of a shutdown whereas today we are in a frail recovery from a deep recession, and the government shutdown could be a body blow to the U.S. economic recovery.

Fourth, the U.S. national debt in 1995 was $5 trillion; today it is nearly $17 trillion and our overall credit standing in the world is much more precarious. The only thing better about this shutdown, from the perspective of government employees who are not being allowed to do their jobs – is that it is happening in early October while the weather is still nice – the last one happened in the winter of 1995-95.

Q:
What would you advise Congressional leaders and the White House to do in order to end this crisis?

Bilmes: This crisis – which is the latest in a series of budget fiascos over the past few years – is largely due to the breakdown of the federal budget process. I have proposed three concrete steps we can take to give us better control and transparency over national spending. These are already standard practice in many state and local governments.

First is to adopt biennial budgeting, which is already used in several states and in the U.S. Department of Veterans Affairs. At a minimum, this would cut in half the number of budget crises the country would face. More importantly, it would improve control over spending and reduce waste. The VA argued successfully that it was impossible to manage hospitals and care for the wounded amidst constant uncertainty about funding. Thousands of government programs – from National Parks to the NIH to weather forecasting – are in a similar fix. Extending the budget cycle to two years and allowing agencies more leeway to manage resources would mean more efficient spending and less time and effort devoted to the annual budget cycle. To make this stick, Congress would need to restrict emergency funding to real emergencies and limit the number of continuing resolutions.

Second, there should be more transparency over expenses, costs, and overheads. This means adopting activity-based budgeting and capital budgeting. This is especially vital in the Pentagon, where 30 percent of the budget is consumed by overhead costs. Right now, these overheads are buried among thousands of individual line-item expenditures, so the current system makes it impossible for the department to separate the fat from the bone.

Lastly, the congressional budget process, which has not been fundamentally changed in nearly 40 years, should be restructured and simplified. The current system is wildly complex, with dozens of committees and subcommittees overlapping and fighting over turf. The status quo makes it impossible for anyone to have jurisdiction over the mandatory and discretionary elements of spending, so the result is gridlock.

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Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy

Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy

"This year, Congress hasn’t enacted a single one of the 12 major appropriations bills that fund government operations, so any agency that doesn’t have funding lined up will be very hard hit."