The Impacts of Government Shutdown 2018-2019

The government shutdown which began on December 21, 2018 officially became the longest shutdown in U.S. history on January 12, 2019, when it surpassed 22 days. It ended January 25, 2019, at 35 days.

What Caused the Government Shutdown?

The shutdown stemmed from disagreement between US Congress and President Trump over appropriations bill to fund the operations of the federal government for the 2019 fiscal year. President Trump forced the government into a shutdown because he demands for $5.7 billion funding towards building a wall along the US-Mexico border while Democrats in Congress refused any funding for the wall. The Antideficiency Act prohibits federal departments for agencies from conducting non-essential operations without appropriations legislation in place, thus causing the shutdown.

What Happens During a Government Shutdown?

The discretionary budget funds most federal departments. But those that provide essential services are not shut down. Essential services are those that include defense, national safety, and security. Many of these agencies are set up so they can operate for weeks without a funding bill. The Defense Department warned it wouldn’t pay military personnel during a shutdown. 

Border Protection and Immigration, air traffic controls, and the Transportation Security Administration remain open. The Justice Department remains open, but gun permits are not be issued during a shutdown. The Postal Service has a separate source of funds, so mail continues to be delivered.

Social Security, Medicare, and Medicaid payments are part of the mandatory budget. That budget also includes the Troubled Asset Relief Program and the Affordable Care Act. These programs are never shut down because their funding is automatic. They were created by separate Acts of Congress.

The major departments that shut down:

  • Commerce, except National Oceanic and Atmospheric Administration
  • Education
  • Energy. Functions that oversee the safety of the nation’s nuclear arsenal, dams, and transmission lines remain open
  • Environmental Protection Agency
  • Food and Drug Administration
  • Health and Human Services
  • Housing and Urban Development
  • Interior, including National Parks
  • Internal Revenue Service, except those processing tax returns
  • Labor, including Bureau of Labor Statistics
  • NASA
  • National Institute of Health
  • Smithsonian

Basically, 9 of 15 federal departments are impacted by the shutdown. This includes about 800,000 federal employees who are without pay during this period. Many are struggling to make ends meet or look into other jobs.

Impact on the Economy

After the first two weeks, the shutdown began affecting economic growth. The Congressional Budget Office said the shutdown reduced gross domestic product by $11 billion. That breaks down into $3 billion in the fourth quarter of 2018 and $8 billion in January 2019. When government spending resumes, all will be recovered but $3 billion.

Workers and contractors who don’t get paid spend less. Government spending is itself a component of gross domestic product. It contributes 18 percent of economic output.


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