Tea Party Inspired Gov't Shutdown is now a Done Deal - Let The Havoc Begin! COST-16+45 Days-$8 + 9 Billion
YES, THE TITLE IS STILL CORRECT - FOR AWHILE
EVEN THOUGH PRESIDENT OBAMA SIGNED the bill putting government back to work today, October 17, 2013, and raising the debt ceiling, it is not over; not by a long-shot. The major damage from the three components of my $.5 billion per day cost of the shutdown ended beginning today, Day 17, but they will nevertheless continue for awhile in a different form. They continue because people and companies who had to shut down because of the gov't closure cannot start back up immediately, if at all. To estimate that rate, for the first 15 days after the gov't went back work, still suffer from out of work vendors and contractors. The next 15 days assume contractors went back to work, In the final 15 days, I assume some residual losses to the economy and, 45 days after the shutdown is over, I assume the hurt to the economy essentially ends.
THE SHUTDOWN COST CLOCK
I THOUGHT I WOULD ADD A SHUTDOWN COST CLOCK to the title. It increases at $.5 billion per day in lost purchasing power in the economy; that is on the LOW side. It is based on the following very rough estimate.
- CNN cites "some studies" that a billion dollars a week is being lost due to the furloughed federal workers. That seems reasonable since the average annual federal salary of those who remained after several rounds of being downsized, outsourced, or replaced by technology (can you spell computers) is around $70,000. (I was a GS-15 once and still typed my own reports, memos, travel orders, etc and did my own filing because computers replaced all of the secretarial staff. Only my bosses (Senior Executive Service types (SES) who were Under or Assistant Secretaries of this and that still had front office staff. My immediate bosses who were also SESes, weren't so lucky.)
- The contractor support is at least as big if not bigger, so they were furloughed as well. For example, the last program I ran had a staff of seven gov't types including me, and 22 contractors doing most of the production work (it was a large management information system; all 29 people are now furloughed.) So I assumed another billion dollars; I bet it is more.
- Then you have all of those people whose income is dependent on the federal government being open such as taxi drivers in Washington D.C., all of those vendors around National Parks, etc. Here I added another billion dollars, there are a lot of them, after all.
- Then I turned that $3 billion a week. into days and rounded to $.5 billion a day, figuring I am on the low side anyway.
Although the House voted last night to pay federal employees their back pay once the shutdown is over, it still awaits Senate approval, I think, but won't change my Federal Government Shutdown Cost Clock one dime. That is because it measures the lost income into the economy, something that if it goes on too long could lead to a recession. If the federal government does return the pay of the federal workers, which happened to me back in 1995, although I didn't know it much later, it won't reduce the the economic loss all that much because much of that back pay will be used to pay off accumulated debt and not the purchase of goods and services.
It also seems like the Defense department will bring back virtually all, of its 400,000 furloughed workers, a move which I disagree with, on the one hand, but am happy with on the other. Sec Def Hagel, with the help of counsel is taking a very broad view of the exception clauses in the shutdown order, too broad in my view; it says an exception can be made for anyone who contributes to the "morale, well-being, capabilities and readiness of service members".. While I am very happy individual defence employees will get paid, it is, at the same time, unfair to the rest of federal workers who don't work in the defense department. My job, for example, as a highly placed and paid cost analyst in 1995 was important to the DoD budget process, but not critical to the defense of the country, I understood why I wasn't exempted from that shutdown. My counterpart today will be going back to work. The end result is the Conservatives get to pay those who they want to pay, defense, and still not pay those who really need money, poor women and children on the WIC program. In any case, I will adjust my clock downward accordingly when these folks return to work.
SHUTTING DOWN THE FEDERAL GOVERNMENT
AT THE MOMENT, AT 8:12PM, SATURDAY, SEPTEMBER 28, 2013, I am riding on Amtrak back to Jacksonville, FL. In 51 hours and 48 minutes, that might be impossible because Amtrak, which partly depends on federal appropriated funds will lose those funds and will have to cut back operations. Because Amtrak cannot operate at 100% capacity from operating revenue only, it will be forced to suspend some less profitable operations if the expected federal government shutdown occurs at midnight, October 1, 2013 and lasts for any length of time.
Assuming this shutdown happens (which is extremely likely given the House plans to send a poison pill bill to the Senate which will table it, and, even if it didn't, President Obama would veto it) then it will be number 18 since 1976; and I suspect it will be the worst the nation has ever seen. To put this in perspective, the following is a list of the previous 17 federal government shutdowns:
Fri, 10/1 - Sat, 10/11/1976 (10): Ford - Gov't shutdowns prior to 1980 were symbolic in that the federal gov't did not shutdown. In 1980, Attorney General Civiletti issued two opinions that the Antideficiency Act prohibited the federal government from keeping agencies open except under certain well defined circumstances.
Sat, 10/1 - Thur, 10/13/1977 (12): Carter - See note for Ford shutdown
Mon, 10/31 - Wed, 11/9/1977 (8): Carter - See note for Ford shutdown
Wed, 11/30 - Fri, 12/9/1977 (8): Carter - See note for Ford shutdown
Sun, 10/1 - Wed, 10/18/1978 (18): Carter - See note for Ford shutdown
Mon, 10/1 - Fri, 10/12/1979 (11): Carter - See note for Ford shutdown
Fri, 11/20 - Mon, 11/23/1981 (2): Reagan - Reagan vetoed a bipartisan Congressional CR, but signs a revised version
Fri, 10/1 - Sat, 10/2/1982 (1): Reagan - Over weekend, too short to count
Fri, 12/17 - Thu, 12/21/1982 (3); Reagan - Over weekend, too short to count
Thur, 11/10 - Mon, 11/14/1983 (3): Reagan - Over weekend, too short to count
Mon, 10/1 - Wed, 10/3/1984 (2): Reagan - Congress couldn't get the job done in time
Wed, 10/3 - Fri, 10/5/1984 (1): Reagan - Congress couldn't get the job done in time
Thu, 10/16 - Thur, 10/18/1986 (1): Reagan - Reagan and Congress again at loggerheads on budget, problem solved with Emergency Spending Bill
Fri, 12/18 - Sun, 12/20/1987 (1): Reagan - Over weekend, too short to count
Fri, 10/5/1990 - Thu, 10/9/1990 (3): Bush 41 - Over holiday weekend, too short to count
Mon, 11/13/1995 - Sun, 11/19/1995 (5): Clinton - For the first time Conservatives used CR to leverage budget concessions, shutdown blamed on Republicans
Tue, 12/5/1995 - Sat, 1/6/1996 (21): Clinton - Conservatives again used CR to leverage budget concessions, effort failed, shutdown blamed on Republicans
Tue, 10/1/2013 - 10/17/2013 (16): Obama - Conservatives, 18 years later once again try to use the CR to leverage budget and social policy concessions. But, polls already have Americans blaming Republicans for what seems like a 99% chance for the next gov't shutdown.
Sat, 1/20/2018 - Tue, 1/23/2019 (3): Trump - Democrats, just 5 years later we have our next shutdown, albeit a short one. The issue was the Democrats wanted language in the bill to protect the Deferred Action for Childhood Arrivals (DACA) which Trump killed the previous October. Trump and the Conservatives opposed this provision and the Democrats refused to give in.
Sat, 12/22/2018 - Sat, 1/25/2019 (35): Trump - Conservatives, just 1 year later once Trump was at an impasse with Congress. Sen Mitch McConnell thought he had buy-in from Trump on a new CR to buy the government more time to come to agreement' it included $5.7 billion which Trump wanted for new wall, but the language restricted it not repair of old wall and other border security measures. But after Trump listened to conservative commentators complaining about him giving in on funding for his border wall (the one Mexico is paying for), he changed his mind and wouldn't sign the CR. As a consequence, Republicans and Democrats couldn't come to agreement on a replacement CR and and America entered its longest shutdown in history. It shaved at least a 1/2 point off of GDP growth and it cost about $5 billion, ironically, the amount he was asking for for his wall.
So, as you can easily see, the only other time this kind of national Russian roulette was ever attempted was by the same ideological group of political operatives, far Right social-fiscal Conservatives. I use harsh terms because what they are doing is insane, unless one's goal is to end up with 50 disorganized States; similar to what was in existence in 1795 (when there were only 13 States). It is not an accident that no Republican or Democratic Congress before them has tried this folly, except their predecessors and mentors from 1995; even their much beloved President Reagan refused to play this dangerous game, he was much more patriotic and wise than these elected individuals. He understood the stakes, he knew where principle stopped and pragmatism started.
WHAT IS THE U.S. HOUSE OF REPRESENTATIVES DOING NOW?
OK, WHAT ARE THE CONSERVATIVES, not Republicans, but Conservatives sending back over to the Senate in place of a clean Continuing Resolution? A Bill that would:
- Delay Obamacare one year (driving up the debt and deficit)
- Repeal the Medical Device Tax (driving up the debt and deficit)
- Fund military pay in case of a shutdown (not sure that is legal unless they pass an appropriation)
- Allow any institution, not just religious ones, to opt out of providing free birth control.
Clearly, Items 1, 2, and 4, do not meet the Democrats laugh test. Majority Leader Reid's only problem is finding the right way not to consider the House bill and to get something passed to send back to the House. And, as I said, even if the Senate passed this Bill intact, President Obama would veto it.
HOW LONG WILL THE SHUTDOWN LAST?
THE REAL QUESTION THEN IS, "how long with the shutdown last?". The record is 21 days, held by Speaker Newt Gingrich, Majority Leader Bob Dole, and President Clinton over similar issues as we have today. I fear this will last much longer because the Right is more extreme and for Speaker Boehner to give in and compromise with the Democrats may fracture the Republican Party beyond repair, if it isn't there already.
The pressure will grow by an order of magnitude or more in about 10 days as the debt ceiling approaches and the country stands on the brink defaulting on its debt ... again. I suspect our credit rating is already going to be downgraded once more regardless of what happens unless a huge chorus of Kumbaya breaks out in Congress.
The United States, I fear, is in for some very rough times ahead, with the real likelihood of being forced into another recession because of these Conservative (actually minimal state liberal and conservative) antics. At the very least, America's national debt will grow several billion dollars more in size, needlessly, as well as growth being stunted by 1% or more, according to the CBO. And all of this because Conservatives have publically removed the word "compromise" from their vocabulary.
LOOKING DAY 13 OF THE PARTIAL FEDERAL GOVERNMENT SHUTDOWN IN THE FACE and only 88 hours to go before we default on our debt, I started thinking about the consequences even deeper. Consider the government shutdown first; that one could last much longer if, push-comes-to-shove, and the Democrats accept a short extension on the debt ceiling without settling the Conservative's attempt to by-pass the American process of normal law-making and bully their version of the American way on the People.
The Federal government spends somewhere around $11 billion a day; most, but not all, of that cash is pumped back into the American economy in one form or another via federal salaries and the purchase of goods and services from American business. When I worked for the Air Force, I spent about $8,000 per day on a contract I managed to provide management information system (MIS) for Air Force. Add to that the salaries of my tiny office and we accounted for putting $8,500 a day back into the economy; my current day counterpart in that office is not doing that right now.
Because of this, the 15 or so contractors my program paid for probably are not getting paid right now either, unless their company moved them to other work if it was available. To give you a little further insight into the trees inside the forest; my old program, the Air Force Total Ownership Cost (AFTOC) MIS (look it up, you might still see my name attached to some old links), is now an integral part of the Air Force's resources allocation process and is used by folks in the Air Staff down to base level. It is a highly complex and technical integrated set of databases built and operated by those contractors I mentioned; there are only three civil service types left to manage and oversee this vital background operation; the rest have been downsized out of existence (but that is for another hub).. The message here is that this critical MIS rests in the hands of contractors who are the only ones who knows how it operates; and they have been told to stay home. If that goes on too long, the contractor will either fire them, or permanently move them to other projects, which is more likely the case, because these guys are very sharp.
Do you see where I am going with this down-in-the-innards look at the operations Air Force? If these politicians fiddle-fart around too long, very serious damage will be done because a long time ago, these same kind of politicians decided it was better to put America's defense needs in the hands of contractors, who have different agendas than civil servants, and downsize the federal workforce until they can barely manage what is left. (I don't mean to denigrate the contractors, most of them do a fantastic job under horrible fiscal conditions, especially the one that worked for me; but the position the free-for-all in cutting the civilian workforce is coming back to haunt us in predictable ways..)
And AFTOC is just one very tiny sliver in an extremely huge process that requires smooth funding to work properly. What I portrayed with AFTOC can be repeated tens of thousands of times through out the federal government that impact your lives in uncountable ways large and small. And each day that passes, $11 billion is not being spent in the economy to buy things. On top of that, all of those people who have been laid off are now drawing unemployment driving up the debt! That money is not going into the economy directly either, because it is paying things like mortgages and credit card bills and only buying the necessities.
So, what do you think happens? Demand falls, of course. What happens then? Manufacturers cut back on production laying more people off and so and so forth. That is whey the CBO is predicting a 1.45% decline in the GDP if this goes on another 10 days or so. Given our GDP is only running at about 2.5%, we don't have to be shut down much longer than the 21 days it lasted in 1995, then the GDP will go negative and recession here we come!
OK, NOW THAT I HAVE BRIGHTENED your day with worry about the shutdown, let's move on to the Debt Ceiling Crisis. It is unbelievable, but there are those who we elected into powerful legislative offices who actually believe that A) going bankrupt is not a bad thing. B) that Secretary Lew is lying about running out our ability 1) borrow money or 2) to find money to pay our bills, or C) even if we do default, we can pay enough of our bills such that no one will notice or care much. Let me be polite, they are a pack of fools; I will elaborate
There has never been a country, large or small, in the last 100 years who has defaulted on its national obligations, such as we are about to do, who has not suffered a catastrophic financial collapse. Not Russia, not Brazil, not Argentina, not Mexico (twice), and not Japan survived the meltdown; why do these politicians believe America is so special as not to suffer the same fate? We are not! It just so happens CNN Money published a chart listing who we owe money to. Of the $5.6 trillion, it goes like this:
- China - $1.3 T
- Japan - $1.1 T (!)
- Caribbean Banking - $.3 T
- Oil Exporters - $ .3 T (soon the US becomes the world's largest producer, btw)
- Brazil - $.3 T
- Taiwan, Switzerland, Belgium - $.2 T each
- UK - $.2 T
- Luxembourg, Russia - $ .1 T each
Personally, I think the Democrats ought to jump on Sen Collin's (R-ME) compromise and work with her to turn it into a bill the majority of Senate Republicans and Democrats could support. To do that, however, Minority Leader McConnell would have to tell the far-Right of his Party to take a hike as would Senate Majority Leader Reid to his far-Left wing. As always, only those in the middle make common sense.
34 HOURS and 53 MINUTES TO GO BEFORE THE SHUTDOWN
EARLY SUNDAY MORNING, 9/29/2013, THE HOUSE OF REPRESENTATIVES passed a new Continuing Resolution, containing the four points listed above, and began preparing it to send to the Senate. There, on Monday, according to Senate Majority Leader Harry Reid, they will decide on which method to kill the House Bill.
Also that day, orders will go out to about 40% of all federally funded workers to stay home. Of the 60% who come to work, the vast majority will be America's uniformed service personnel. The remainder will be the President and some of his staff, Congress and their staff, and "excepted" civil servants whose job it is to protect life or property.
That means most of DoD's civilians will go home as will the Dept's of Labor, Health and Human Services, Interior and the like, as well as some of the Dept's of Transportation and Agriculture.
2 HOURS and 46 MINUTES TO GO UNTIL THE FEDERAL GOVERNMENT SHUTS DOWN!
THINK ABOUT IT, AMERICANS REALLY DO WANT SOMETHING LIKE OBAMACARE, yet a handful of Conservatives want to use unethical tactics to thwart the will of America. Consider:
- Obamacare is Law
- It was passed legally using standard Congressional procedures used by both sides throughout history
- Republicans tried to unseat Obama for a second term over Obamacare and America resoundingly told them no, we want Obama and Obamacare
- Polls have consistently shown (even though Conservatives misrepresent the results) that a majority of Americans want Obamacare or something MORE LIBERAL than Obamacare. The number of Americans who like Obamacare or don't like Obamacare because "it is not liberal enough" has ranged from 49% to 59% since March 2010; while only 34% to 37% of Americans oppose Obamacare because it is too liberal.
It would seem to me President Obama and the Democrats have every right to resist the right-wing faction of the Republican Party who want to defy the will of most Americans, especially when they try to bully their way into getting what they want by threatening to bring great pain on the Nation if the small minority can't change the law outside the normal legislative or electoral process.
In the last few hours, the Senate rejected the Conservative Bill I wrote about earlier, kicking it back to the House. About 9 PM EDT, the House passed a paired down Bill that still postponed Obamacare and sent it back who just defeated it and sent it back to the House once more.
8 HOURS and 36 MINUTES PAST ZERO HOUR
THE CONSERVATIVES (not Republicans) MADE ONE FINAL FUTILE ATTEMPT to by-pass the normal legislative process to change or get rid of an existing law which well over 50% of American's want in one form or another and who reelected the President whose name it now bears, President Obama, thanks to those same Conservatives trying (and failing) to be sarcastic. I must give credit where credit is due, the sane-wing of the Republican Party, the moderates, what few of them are left, tried a revolt near the end of the process last night. Even though they are opposed to Obamacare as well, they are opposed to a government shut down even more so they jumped ship at great peril to their political career and voted, probably holding their noses, with the Democrats. Those were the true patriots of the Republican Party who put Country ahead of Party.
Besides the 800,000 plus federal workers now out of a job, the first Americans to feel the wrath of the Conservatives are the millions attending, or about to attend our National Parks who are being unceremoniously, but politely, being told to go home, or at least somewhere else, your vacation is ruined. There are some 23,000 federal employees in national parks who have been furloughed, but they may end up getting paid. Who won't get paid are an equal number of concessionaires selling their wares in and around the park.
To pin this on the Conservatives is an easy leap in logic. They couldn't get their way using the normal legislative process, so instead of acting like big boys and trying again next year or getting more who hold their point of view elected to office, they reduce their age considerably and hold the country hostage in a manner used only once before in the history of the United States, by the Conservatives of 1995.
OVER 240 HOURS INTO THE SHUTDOWN AND LESS THAN 200 HOURS BEFORE THE COUNTRY RUNS OUT OF MONEY
OCTOBER 11, 2013: MY WIFE AND I FINALLY BAILED on our retirement accounts and went into cash; we could let America suffer any longer. The next day the responsible Republicans and the majority Party started talking and the Dow climbed 323 points ... your welcome!
This morning, they seem to still be talking and the before market trading has the Dow up 11 points, but only the real trading will tell. What the politicians are talking about, however, is a short-term fix to the debt ceiling and nothing for the shut down; the Hours version has strings attached for a 6-week extension and the Left wants a clean extension. Nobody knows how the Conservatives are going to act. My money is staying in cash until it is ALL resolved.
Just a note, on the debt ceiling, Oct 17, 2013 is when the government loses its authority to borrow money to pay its debts. We do have a few bucks in the bank and money does keep coming in from various sources; and, because of the shutdown, less is going out. That means some things can still be paid, just not everything, which means, by all definitions, America is bankrupt.
OCTOBER 12, 2013: They are still talking and the Dow climbed another 111 points! The market is closed for the weekend.
OCTOBER 13, 2013: Disaster! President Obama and the House stop talking and two separate measures, one a compromise from moderate Republicans, failed in the Senate ... back to square one!!
OCTOBER 14, 2013: Senate Majority Leader Reid and Senate Minority Leader McConnell are talking today. My prediction for the market on Monday, October 15, 2013 is a drop of 400 to 500 points.
OCTOBER 17, 2013 - THE GOVERNMENT IS BACK TO WORK AND THE DEBT CEILING HAS BEEN INCREASED ... FOR NOW.
LATE LAST NIGHT, A DEFEATED HOUSE passed the Senate compromise bill to temporarily refund government operations and raise the debt ceiling, and the President signed it; setting the stage for a repeat performance in three months. Since the stock market had built the passage into their latest trading (up 600 points over the last week!), the market took no notice today; and I can start trading options for November and December expiration dates.
After causing over $8 billion in lost economic expansion, and more to come as well as incalculable national stress and heartburn, the Conservatives won 1.01 compromises and nothing else. They ensured the U.S. remains underfunded and unable to deliver needed services adequately for the next three months and that those receiving Obamacare subsidies verify their income; a sensible requirement, in any case. Beyond that, Conservatives failed in every respect and probably caused irreparable harm to objective and subjective harm to America's economic and foreign policy.
Furthermore, the current economic damage is not magically over.with Obama's signature. The $.5 billion daily increase used for my Cost Clock is stratified into $.167 billion each for Gov't Employments, Gov't Contractors, and vendors who rely on Gov't operations. With the start-up of the federal government these numbers, in the short-term, don't go-away, they just change in their nature.
- For government employees, the loss to the economy does stop, because pay starts up again. In fact, the economy benefits from a one-time basis because Congress passed a bill to fund back-pay.
- For government contractors, pay starts back up, but no back pay. However, depending on the contract, the cost to the government may keep on increasing because now they have to pay for "start-up" costs to get the contractor's operations going again, hire and train new people, if necessary, etc.
- Vendors dependent on government operations. Their income will slowly return to normal as the source of their income comes back, e.g., tourism.
WHO WILL YOU BLAME?
WHO WILL YOU BLAME IF THE FEDERAL GOVERNMENT IS SHUT DOWN FOR A WEEK OR MORE?
VOTES - 13: # who blame
- the Conservatives Specifically - 4
- the Republicans Generally - 5
- the Senate Democrats - 0
- President Obama - 1
- both President Obama and the Senate Democrats - 1
- everybody equally - 2
- don't have a clue - 0
SOME INTERPRETATION - It would seem the Conservatives/Republicans are not faring to well, accounting for 69% of the votes and blame. But unlike both mainstream and the talking idiot heads and blogs on the Right and the Left, I try to look beyond the numbers; in this case down to my Demographic Survey #1 (which is why I ask it). I notice that at this point in time 62% of the votes cast were from the Left. I sincerely doubt any one of those votes were for President Obama or the Senate Democrats, although it might be possible one voted for "Everybody Equally"; let's just say all eight of them voted for the Republicans. Likewise, we can assume the two Right leaners voted for the Democratic side.
That leaves us the three middle-of-the-roaders. Chances are pretty good one of them blamed the Republicans while the other two blamed everybody. It is those three votes which are most important to me.
Likewise, in the second question regarding who you would vote for, the Democrats pick up a vote. The two Republicans will still vote Republican and the eight Democrats will vote Democratic. For those in the middle, it seems one wants to vote for a third party candidate while the other two appear to lean toward the Democrats.
Now, with 13 votes, you need to take all of the above with a grain of salt because that is not a large enough sample size to be stable, but it is nevertheless for someone like an INTP to wonder about. If I am seeing the same results with 35 votes, then maybe there is something more real going on.
HOW WILL THIS CHANGE YOUR VOTE IN 2014?
If the government shuts down for two weeks or more, will you be more likely to vote in 2014 for a
DEMOGRAPHIC SURVEY #1
Do You Lean
DEMOGRAPHIC SURVEY #2
© 2013 Scott Belford