Sylvia Mathews Burwell, the newly minted White House budget director, was among the few administration officials bullish that President Obama and congressional Republicans could somehow overcome their differences and negotiate a budget deal before a Sept. 30 deadline. Last month, she told skeptical reporters that “We shouldn’t all just accept that, ‘Oh, nothing can get done.’ That’s just not true."
That was then.
As Obama was telling business leaders yesterday that he would refuse to give in to Republican blackmail over the debt ceiling and the future of the Affordable Care Act, Burwell issued a detailed memorandum instructing department and agency heads to prepare for the possibility of a government shutdown at the end of the month.
“The Administration does not want a lapse in appropriations to occur,” Burwell stressed. “There is enough time for Congress to prevent a lapse in appropriations, and the Administration is willing to work with Congress to enact a short-term continuing resolution to fund critical Government operations and allow Congress the time to complete the full year 2014 appropriations.”
“However, prudent management requires that agencies be prepared for the possibility of a lapse,” she added. “To that end, this guidance reminds agencies of their responsibilities to plan for agency operations under such a contingency.”
Burwell’s memorandum not only provided a heads up that the president and congressional Republican leaders were on a collision course over the terms of a short-term spending measure critical to keep the government operating beyond the current fiscal year, but also offered a detailed guide as to how to navigate the myriad issues in the event of the first government shutdown since the mid-1990s.
That advice includes guidelines for which employees would be sent home without pay and which ones would be deemed essential to stay on, the fate of government contractors and their government overseers throughout a shutdown, rules for issuing new contracts even while the government is largely shuttered, and guidance to a host of other questions.
“Normal, routine, ongoing operational and administrative activities relating to contract or grant administration (including payment processing) cannot continue when there is a lapse in funding,” the memo stated. “Therefore, agency employees who are paid with annual appropriations and who perform an activity associated with contract or grant administration (including oversight, inspection, payment, or accounting) should generally not continue work during a funding hiatus.”
The fiscal crisis appeared to be moving into a new, more dangerous phase on Wednesday as House Speaker John Boehner (R-OH) announced plans for a House vote on Friday on a measure that would link a continuing resolution to keep the government open through Dec. 15 to a measure defunding the Affordable Care Act, the president’s signature health care law. That same bill will include a requirement for Treasury to give priority to Social Security and disability payments in the event the government reaches its borrowing limit and cannot pay all of its obligations.
Dozens of conservative and Tea Party House members are demanding an end to Obamacare as the price for keeping the government afloat or averting a default when the Treasury’s current borrowing authority expires as early as mid-October.
"The fight over here has been won,” Boehner said. “The House has voted 40 times to defund, change Obamacare, to repeal it. It's time for the Senate to have this fight."
Obama declared yesterday that while he is willing to negotiate a new budget plan and address a multitude of Republican concerns, he would not allow the GOP to use the debt ceiling as a “bargaining chip,” as was the case during the 2011 negotiations over a budget and deficit reduction plan.
“What I will not do is to create a habit, a pattern, whereby the full faith and credit of the United States ends up being a bargaining chip to set policy,” he said. “It’s irresponsible. The last time we did this in 2011, we had negative growth at a time when the recovery was just trying to take off and it would fundamentally change the how American government functions.”
Senate Majority Leader Harry M. Reid (D-Nev.) has said that once the House acts, he plans to strip the health-care provisions from the government funding bill and send it back to Boehner with just days left before the Sept. 30 deadline. That would leave the speaker the difficult choice of approving a stopgap bill with Democratic votes or shutting down the government.
The last major government shutdowns of 1995 and early 1996 stemmed from a bruising conflict between Democratic President Bill Clinton and a GOP-controlled Congress over funding for Medicare, education, the environment and public health in the fiscal 1996 federal budget.
The federal government put non-essential government workers on furlough and suspended non-essential services from November 14 through November 19, 1995 and from December 16, 1995 to January 6, 1996, for a total of 28 days.
If there is a repeat of that high drama next month, the U.S. economy is certain to take a huge hit, according to many budget and economic experts.
“A long, broad shutdown of the federal government could drag an already weak economy,” CBO Director Douglas Elmendorf warned in a statement Wednesday. “Employees would lose paychecks, federal contractors receive fewer contract dollars and consumers and businesses would lose confidence in leaders' abilities to govern.”
"We should learn from our experience in 2011 – and not repeat it,” Sen. Amy Klobuchar (D-MN) said during testimony before the Joint Economic Committee yesterday. “There is broad agreement that a default would cause significant harm to the economy. It would disrupt financial markets, limit access to credit and raise financing costs. It could also trigger a run on money market funds and force the federal government to renege on commitments to individuals, businesses and governments."
Though it’s difficult to know exactly how much a shutdown would cost, previous experience indicates that the total is likely in the billions. The CBO estimated in 1996 that the 26-day shutdown in the mid 1990’s cost $1.4 billion to $2 billion when adjusted for inflation.
That’s a low estimate, since it didn’t take into account the lost value of work done by the thousands of non-essential federal government employees.
Senate Budget Committee Chairwoman Patty Murray (D-WA) lashed out at the Republicans during a floor speech yesterday, charging that they were placing their hostility toward Obamacare above the national interest.
“They’ve decided they’re willing to play politics with Americans’ health care,” she said. “They’ve decided it’s better for them to sabotage this law than improve it. And they’ve decided that beyond all that, they’re also willing to devastate our nation’s economy to kill this law. We will not let that happen.”