At midnight on Friday night the federal government shut down.
Government shutdowns are relatively rare., although the current one is the third of the year. In 2013 when a small group of conservatives, led by Sen. Ted Cruz, R-TX, refused to vote for a budget unless President Barack Obama agreed to stop implementation of his health care law.
To find a shutdown before that we have to look back to 1996, when the Republican controlled congress staged a protest over President Bill Clinton's budget. Democrats. While Republicans own the government shutdown as a tactic in the 21st Century, the Democrats used the tactic nine times during the Reagan and Bush administrations between 1981 and 1992.
So, heading into Christmas the government has officially closed its offices. Here's what that means.
What Is A Government Shutdown?
During a government shutdown all federal offices not deemed essential, mandatory or necessary to health and safety close and the employees go home.
Workers in offices like national parks, IRS taxpayer assistance and home loan processing get furloughed. As non-essential personnel the government can continue to function without them. Air traffic control workers, law enforcement agents and soldiers will continue to show up for duty however, as they're deemed essential for health and safety. It also doesn't apply to any agencies in the federal government which are self-funded, such as the Post Office, or mandatory spending which is otherwise required by law.
So letter carriers will return to duty on December 26 for those holiday returns.
Finally, a government shutdown does not apply to state workers. Snow plows will take to the streets and cops will continue to patrol your neighborhood. School will go back into session if the shutdown lasts that long, because all of those are state level functions.
The federal employees who are sent home receive what's called a "furlough." It means a temporary suspension of duty. They will not receive paychecks during the government shutdown. While giving employees back pay for the furlough period is at the discretion of Congress, historically it has always done so.
What Are Essential Government Services?
Most of the direct public-facing services of the federal government are considered essential or a part of health and safety. This includes:
1. Law Enforcement
FBI, ATF, U.S. Marshals and other agents of federal law enforcement continue to work through government shutdowns. The Border Patrol, which is the heart of this shutdown battle, will show up for work as well.
Soldiers will man their posts, aircraft carriers will burn fuel and spies will keep cracking codes. All of the nation's defense agencies continue to operate during a government shutdown.
3. Social Security, Medicare, Medicaid
These are mandatory spending services, like social security, medicare and medicaid, whose budgets are approved separate from the annual federal budget. As a result checks will continue to go out. However services like customer assistance and new enrollment will be suspended as those workers have been sent home.
4. The Post Office
The Post Office pays for itself through stamps, services and delivery contracts. Neither snow nor rain nor heat nor gloom of night nor a federal budgeting battle stays these couriers from their appointed rounds.
5. Air Traffic Control
All air traffic control services remain fully operational through a government shutdown. This also applies to the TSA.
How Does a Government Shutdown Happen?
The government shuts down when Congress and the President don't agree on a plan to continue funding its operations.
Each time Congress passes a spending authorization bill it authorizes money for the government to spend on its operations, everything from buying light bulbs to paying salaries. When the money allocated in the last budget has been spent Congress needs to authorize either a new budget or what's called a Continuing Resolution. This is a statement simply reauthorizing the last budget at existing spending levels, or at existing levels adjusted for inflation.
The government runs out of money if Congress does none of that. It shuts down specifically because agencies can't keep paying salaries and it's illegal for anyone to show up for work in a government office without receiving pay. This is why self-funded services like the Post Office stay in operation.
Essential services are protected from a shutdown because federal law allows the Treasury to allocate money for their work regardless of the budget.
Funding gaps are a result of the 1974 Congressional Budget Act, which established the modern annual budgeting process. However the shutdowns didn't begin until 1981 with a series of opinions written by then-Attorney General Benjamin Civiletti. In these memos Civiletti held that existing law required Congress to send all workers home unless it had specifically authorized money for their salaries. Prior to that, workers continued to show up during funding gaps and the government simply incurred a debt toward them.
How Will a Government Shutdown Affect You?
In the short term, the current shutdown is unlikely to affect you much at all unless you're a federal employee.
A brief government shutdown amounts to little more than a hiccup and a few days off for the affected personnel. If it lasts no more than a few days most people might not even notice it, coming as it did at the start of a holiday weekend.
The main offices affected by a government shutdown are ones that the government can do without… for a while. The most public facing services that close are the National Park Service, which operates most federal monuments and parks nationwide, and customer service operations across all government agencies.
So someone trying to get a jump on their taxes in the coming week might have a hard time, as almost every IRS agent has been sent home.
This isn't to say that the furloughed employees are unimportant. Work such as food inspection by the FDA has shut down, for example. That's not a problem in the short term, but as time goes on the risk of uninspected food will grow. Most CDC workers will head home, a problem at any time of year but particularly acute during flu season.
Financial services will see disruption, as banking and lending depend on several points of contact with the Treasury, the IRS and the Federal Housing Authority to operate smoothly. (Anyone trying to get a mortgage before the end of the year, for example, may be out of luck.) Even hiring will slow down, as services such as W-2 and W-9 processing grind to a halt along with the E-Verify service.
Then there are aid programs like the Temporary Assistance for Needy Families, federal school lunch programs and home energy assistance. All of these will see growing disruptions and eventually will close down altogether during the darkest, coldest months of the year.
Ultimately how a government shutdown affects you will depend entirely on how long it lasts. For a brief shutdown, the answer is probably not at all. If the shutdown lasts for weeks, as some have in the past, you'll start to notice it in all sorts of small ways. But most of all, a lingering shutdown could drag down the economy, slowing down hiring, lending, research grants and day-to-day business in countless small ways that will simply make it harder to do business across the country.
This Time Might Be Different
Which is why this shutdown might be different.
There is almost certainly a recession on the horizon. With the stock market in the middle of its longest decline since 2008, including an historically high single-day loss on Christmas Eve, it's hard to deny the warning signs. There's reason to believe that, when it comes, this recession grow quickly. With wages still low by historic terms and American consumers still overburdened by debt, particularly student loans, losses from a recession in 2019 could mount very quickly.
The government shutdown might have far more significance in this context.
A holiday season shutdown will drag down consumer spending during a critical part of the year for most business' balance sheets. Furloughed employees tend to become financially conservative, saving their money until they know that paychecks will resume. In raw numbers, nearly a million consumers will close their wallets in the days or weeks to come.
It will take time to see how this affected pre-holiday spending, if at all, coming so close to Christmas as it did. However retailers have come to depend on post-holiday spending as well. This year the after Christmas sales may lose hundreds of thousands of potential customers.
The holidays, too, will prolong this shutdown. Senate Majority Leader Mitch McConnell, R-KY, adjourned the Senate for Christmas shortly after failing to reach a budget deal. House Speaker Paul Ryan, R-WI, meaning that this shutdown will last for at least six days and almost certainly a week. When they return, members of Congress will have only three days to reach a deal before adjourning once more for New Year's Eve.
There is no reason to panic. Government shutdowns have happened many times in the past and, while they can cause very real hardship for the furloughed employees, have never led to major economic disruption. However there's also no reason to ignore the danger signs.
With multiple intervening holidays and weekends likely to delay this shutdown, and an economy that appears more fragile by the day, this shutdown just might be different.