The conflict among House Republicans, Senate Democrats, and the president has shut down the federal government:
The U.S. government began to shut down for the first time in 17 years early Tuesday, after a Congress bitterly divided over President Obama’s signature health-care initiative failed to reach agreement to fund federal agencies.
Thousands of government workers arrived at federal office buildings to clean off their desk, set out-of-office e-mail messages and make whatever arrangements were necessary so they could stay off the job indefinitely.
Others, including border patrol officers, prison guards and air traffic controllers, were required to work but were told they may not be paid.
Washington’s iconic monuments and memorials were still open in the early morning hours, but the National Park Service soon dispatched workers to shut them down and move barricades into place. Signs posted on the barriers erected at the entrance to the Lincoln Memorial read: “Because of the federal government shutdown all national parks are closed.”
Most of the people most of the time may hardly notice the shutdown. I think we should all be worried and here’s why.
Comparisons between today’s shutdown and the one that occurred in 1995/1996 are invidious. During the last shutdown we were in the middle of a boom. Now the economy is recovering phlegmatically from a serious recession. Seventeen years ago employment was high and unemployment was low. Today unemployment is relatively high and employment is lower than it has been in 30 years. More people have been unemployed longer today than at any time since the Great Depression of the 1930s.
Government at all levels plays a larger role in the economy than it did seventeen years ago. Then, government spending accounted for about 30% of the economy. Now, it accounts for nearly 40% of the economy.
There are probably as many explanations for our low employment and high unemployment as there are people trying to explain them but I don’t think that it is arguable that more economic activity wouldn’t improve the situation.
There are only five sources of economic activity: personal consumption, business investment, government spending, exports, and imports (which reduce economic activity). Reduced government spending means reduced economic activity. None of the other factors can step in and fill the gap, at last in the near term. That means that economic activity will decline as a result of the shutdown and whatever role economic activity plays in unemployment the shutdown will make things worse.
Regardless of your views on the merits of the House Republicans’ beef with the Senate Democrats and the president, this is the wrong thing to do at the wrong time. Worst of all I see no obvious basis for a compromise. Both sides have been poisoning the well for the last five years (if not the last fifteen years). It’s a game of Chicken all the way to the bottom of the cliff.