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Government Closed

Government Shutdown – Minimal Impact for most Americans

in Money/The Money Slant/The Political Slant by

* Op-Ed


 

Everyone calm down.

WASHINGTON — From an economic perspective, the shutdown of 2013 led to a GDP decrease of 0.25%.  It’s true that hundreds of thousands of federal employees received no pay, or late pay as a result of the previous shutdown, that inconvenience merely impacted their discretionary spending.  While contracted employees may not be impacted, the ability of the government to enter into new contracts, the execution of existing contracts may be impacted, and could lead to increased costs for follow-on research and development type efforts.

Tourism related industries are affected by the shutdown, as national parks closed, museums gift shops sat empty, and there were additional costs labeled as “lost productivity.”

But for the most part, a short shutdown would have minimal impact for most Americans, at least in the immediate term.

Many outlets describe the lost productivity, etc – but appear to assume the lost productivity has a direct correlation to salaries.

The federal budget for Fiscal year 2018 is $4.094 Trillion.  Assuming a 16-day shutdown (using 2013 figures) would “cost” $2.5 billion in productivity.  This $2.5 billion “lost” is approximately one half of one percent (0.5%) of federal funding.  Even from a relative perspective, the impact is minimal.

Federal News Radio identifies 6.6 Million days of lost work attributable to the 16-day shutdown in 2013, and estimates the lost productivity at $2.5 billion.  This appears to be a common metric to determine the loss of government productivity. For you business types, you know that the private sector measures output per units of input to determine efficiency and productivity, but such a metric cannot be applied to the government.

This method is flawed.

Profitable ventures are frequently not of social value.  Hence Friedman’s viewpoint that the corporate social responsibility of business is to render a profit.

Conversely, efforts focused on social value are typically not profitable.  This is where government fits in. This is where the gap is filled or the concepts bridged.

To assume the output of each federal employee is commensurate with their input is flawed. They are not equal. Our founding fathers structured our government to be effective, but inefficient.

This inefficiency provides predictability, stability, and overall security in initiatives that require debate, collaboration, and widespread support, moving forward slowly and carefully toward implementation.

The government will carry on, with essential personnel, the military, and contracted employs facilitating daily operations.  Mandatory functions will continue.  The planning and in-process efforts of the federal government will largely go unaffected in the short term, and most Americans will be unimpacted.

Should the shut-down last for any significant period of time, there will be more notable effects, but short-term impacts will be minimal. So everybody….keep calm and carry on. The US government will be right back after this brief message from its sponsor.

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