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Tuesday, January 22, 2019

Shutdowns Cost Money

At NYT, Jim Tankersley explains why shutdowns cost money for taxpayers:

First, employees will get back pay for work that they could not do.
Paying employees for work they were not allowed to perform was the highest cost identified in a report the Obama administration commissioned that estimated the price of a 2013 government shutdown. President Barack Obama’s Office of Management and Budget estimated total compensation costs — pay and benefits — for workers affected by that shutdown at $2.5 billion. It lasted 16 days, which is shorter than the current shutdown.
Second, the government will miss out on collecting certain taxes and fees.

Third, it will owe other payments.
Laws called the Prompt Payment Act and the Cash Management Improvement Act require the federal government to pay interest on contracts, grants and other obligations that it is unable to fund during the shutdown. If, for example, NASA is unable to pay a contracting company on time during a shutdown, it will still have to pay that money once operations resume — plus some extra. The Prompt Payment interest rate for the first half of this year is 3.625 percent, according to the Treasury Department.
Finally, the shutdown will hurt the economy.
The longer the shutdown lasts, the faster the economy could fall. If the government stops issuing nutrition assistance for low-income families, if agencies can’t process federally backed home loans, if unpaid airport security workers call out sick en masse and air travel is strangled — that could add up to a major economic disruption.
Megan Cerullo at CBS:
Average weekly direct and indirect costs of the partial shutdown, which began Dec. 22, currently add up to $1.2 billion, according to Beth Ann Bovino, S&P Global's U.S. chief economist. Monday marked the start of the shutdown's fifth week, and the closure will have caused roughly $6 billion in damage to the economy if the government does not reopen by the end of the week, Bovino estimated in a recent research note.

And the average weekly cost of the shutdown is expected to grow as the damage to industries and consumers both widens and deepens. "The longer this shutdown drags on, the more collateral damage the economy will suffer," Bovino wrote.
Direct effects of the marathon shutdown include lost productivity from the hundreds of thousands of furloughed workers who haven't been paid since the Dec. 22 closure. While the precise impact has not been calculated, the Bureau of Economic Analysis estimates that federal employees' lost hours during a 16-day shutdown back in October 2013 reduced fourth-quarter GDP by 0.3 percentage points.