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.
Current Status of Shutdown Negotiations
On January 25, 2019, President Donald Trump and Congressional leaders agreed to end the most recent shutdown. Trump signed a bill that funded the government for three weeks while a bipartisan committee negotiated plans for increased border security.
On February 12, 2019, the committee approved a budget package that included $1.375 billion for 55 miles of new border fences. It adds $1.7 billion to Homeland Security’s budget for additional border security. On February 14, 2019, the Senate and House passed the measure, avoiding another government shutdown.
Trump declared a national emergency in addition to signing the spending bill. The National Emergencies Act of 1976 grants the president broad discretion in declaring an emergency. President Barack Obama used it after the 2009 swine flu outbreak, and President George W. Bush used it after the 9/11 terrorist attacks.
Trump plans to use the emergency to repurpose existing military spending to build the wall. He may also repurpose funds from the Army Core of Engineers designated for disaster relief. But he faces opposition from many fronts. Texas landowners are suing to protect their property rights. California has sued to keep the funds for wildfire disaster relief. Fifteen other states have also sued to keep Trump from bypassing Congress.
On February 26, 2019, the House passed a joint resolution to repeal the national emergency. The Constitution states that only Congress has control over the budget. Democrats have the four Republican votes in the Senate needed to pass the bill. Any bill approved by both houses of Congress becomes law after 10 days if the president doesn’t sign it. Trump has said he will veto it. The bill needs a two-thirds majority vote in both houses to override the veto.
Trump launched the shutdown on January 4, 2019, when he said he wouldn’t approve a budget that didn’t provide $5.7 billion for a 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 who have applied for asylum at the border since November 2018.
Most Recent Shutdown
The most recent shutdown began on December 21, 2018, when the president and Congress couldn’t agree on a budget for nine federal agencies. 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 Trump and Congressional leaders agreed to a stop-gap spending bill.
There were 420,000 critical employees who kept working without pay. About 380,000 non-critical employees were sent home without pay. As the shutdown stretched on, many looked for part-time work to pay bills.
On January 11, Congress passed a bill to reimburse federal exempt employees for lost wages once the shutdown ended. 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 staffing wasn’t sufficient to maintain and protect the parks, which remained opened.
- Vandalism destroyed natural resources that could take 300 years to replace. The department lost $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. As a result, it took more than a week to repair the Hubble Space Telescope.
Impact on the Economy
After the first two weeks, the shutdown affected economic growth. The Congressional Budget Office said the shutdown reduced gross domestic product by $11 billion. That breaks down into $3 billion in the fourth quarter of 2018 and $8 billion in January 2019. When government spending resumed, all would be recovered but $3 billion.
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.
The true cost is probably higher. The CBO couldn’t estimate the impact on businesses who couldn’t get federal permits or loans in time.
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.
Democrats said a wall 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. They want more funds to target ports of entry, advanced technology for scanning vehicles for drugs, and more immigration judges.
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 issued. 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 the 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 shutdown began on October 1, 2013. Republicans tried to stop the launch of Obamacare. The Republican-controlled House submitted a continuing resolution without funds to administer the Affordable Care Act of 2010. The Senate rejected the bill and sent one back that funded the program. The House ignored that bill. It sent one back that delayed the mandate that everyone should buy health insurance. It also deleted the ACA 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. The Department of Health and Human Services had already sent out the funds needed to launch the health insurance exchanges.
During the shutdown, Speaker John Boehner opposed raising the debt ceiling and funding the government unless Democrats agreed to cut Medicare, Medicaid, and Obamacare. These mandatory programs weren’t even part of the discretionary budget that was shut down. On October 10, Boehner and a team of House Republicans met with Obama to propose raising the debt ceiling for six weeks to allow time for negotiations. Unfortunately, talks between Boehner and Obama broke down.
The Senate then created a plan to force the House to an agreement, as it did during the 2011 debt ceiling crisis and the fiscal cliff crisis. Senate Democrats wanted to increase spending by $70 billion on the sequestration cuts and to raise the debt ceiling for a year. Republicans wanted cuts in Medicare and Obamacare and a three-to six-month extension of the debt ceiling.
The House submitted its own plan, too, but neither side of Congress would accept any of the proposals. The House plan was dropped when it didn’t get the support of Tea Party Republicans. So Speaker Boehner put the Senate plan to a vote, where it finally passed and was signed by President Obama on October 16, 2013.
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. This committee was tasked 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.