If the U.S. government shuts down, here's how it would work

If the U.S. government shuts down, here's how it would work

Wednesday, Apr. 06, 2011

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Social Security checks would still go out. So would tax payments and refunds for e-filed returns. Soldiers would remain on duty in Afghanistan and Iraq, and sailors off the coast of Libya. FBI agents would still work. Mail would be delivered.

Those are some of the services that would continue even if the federal government runs out of money at 12:01 a.m. EDT Saturday with no agreement between Republicans and Democrats in Congress and the White House to extend the budget.

But much of the government would shut down.

Roughly 800,000 federal employees would be furloughed, including many civilian workers in the Defense Department, much of the White House staff, and at least some staff in Congress. National parks would close. Hand-mailed tax returns would go unopened.

With no agreement to finance the government past Friday night, government agencies prepared contingency plans Wednesday for what would stay open and what would close. Each of the three branches of government - executive, legislative and judicial - made their own plans.

The key criteria for keeping government employees working is whether their office is critical to protecting life or property, or has another source of money, such as user fees.

Whether they work or not, all federal employees would go unpaid during the shutdown.

Those who work would be paid retroactively, according to the Office of Personnel Management. Those ordered to stay home would be paid for that time only if Congress and the president agreed to it.

Here's a list of how a shutdown would impact some parts of the federal government:
-Military. Troops would remain on duty, receiving IOUs rather than paychecks. "They will continue to earn money during this period," said a senior Obama administration official who spoke on condition of anonymity as a matter of White House policy.

"But given that we don't have any money during this period of time, they will not receive paychecks." They would be paid retroactively once Congress and the president sign a budget deal.

-Civilians at the Department of Defense. Those whose work helps protect life or property would keep working. Others would be sent home, apparently without pay. "We expect a significant number of DoD civilian employees would be furloughed," the administration official said.

-Internal Revenue Service. Income tax returns filed electronically would be processed. Payments would be collected. "We need to be able to collect the money that is owed to the U.S. government," the senior administration official said. Refunds for e-filed returns also would be sent automatically. But paper-filed returns would not be processed, and refunds would be held until furloughed employees could return to work. Audits would be postponed.

-Mail. The U.S. Postal Service would still deliver the mail, thanks to income from stamps. "We're self-funded," said Postal Service spokesman Gerry McKiernan. "It's a normal day for us."

-Social Security. Checks would still be sent out to current beneficiaries, either through the mail or electronically. The Obama administration said final plans were still being prepared, and would not say whether the Social Security Administration would be able to handle claims for new beneficiaries.

-Medicare. Would still make payments to beneficiaries "at least for a short period of time," according to the senior administration official.

-FBI and other federal law enforcement. Would keep working.

-Parks. National Parks would close. The Smithsonian Institution's museums and the National Zoo would be closed. Saturday's Cherry Blossom Parade in Washington would be canceled.

-Air traffic control. The Federal Aviation Administration refused to say whether it would shut down air traffic, referring questions to the Office of Management and Budget. That office didn't respond to questions.

-Environmental Protection Agency. The EPA would stop doing environmental impact statements and issuing permits, causing some energy and transportation projects to stop. The administration wouldn't say whether the EPA would continue testing to see if radiation from Japan reaches the U.S.

-Small Business Administration. The SBA would stop approving applications for loans from small businesses.

-Federal Housing Administration. The FHA would stop guaranteeing mortgage loans, which could have a significant impact heading into the spring home buying season, the year's busiest. Administration officials noted that the FHA now guarantees 30 percent of home mortgages, up from 12 percent at the time of the last government shutdown.

-National Institutes of Health. Would continue to treat patients in clinical trials, but would stop accepting new patients or starting new clinical trials.

-White House. The president and vice president would keep working. The Secret Service would remain on guard. But many political aides would be sent home. "We anticipate significantly lower staffing levels at the White House," the senior official said.

-Congress. Each member of the House of Representatives and the Senate would decide for themselves which members of their staffs needs to keep working and which could be furloughed, according to the House Administration Committee. Each member would decide "which positions in the office are associated with constitutional responsibilities, the protection of human life, or the protection of property," the committee said.

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Short-Term Government 'Shutdown' Akin To Snow Days

By JED GRAHAM, INVESTOR'S BUSINESS DAILY
Posted 04/06/2011 06:58 PM ET

With funding set to expire on April 8, prospects for a last-minute spending pact hinge on which result deal makers fear the most: outraged political supporters or a government shutdown.

The former may well be scarier — at least in the very short term. While the phrase "government shutdown" is politically loaded, from a practical perspective, a several-day halt of noncritical functions might be roughly similar to a freak snowstorm in April.

National parks and monuments would close, as would visa offices. Roughly 800,000 federal employees would stay home, the Obama administration says.

But Social Security checks would still go out, because mandatory programs that don't depend on annual appropriations would be relatively unaffected. Federal workers tasked with protecting life and property would stay on the job, though without pay — including the military.

The Sun Will Rise And Set

"Think snow day, not Armageddon," said Chris Krueger, political strategy analyst at MF Global's Washington Research Group.

But a shutdown would be a big enough to-do politically that Krueger still sees about 50-50 odds of a resolution, even as the two sides are appearing to dig in.

The White House rejected the Republican offer to extend funding for a week, if paired with $12 billion in additional cuts. President Obama also seemed to draw the line at $33 billion in cuts from current-year funding.

House Speaker John Boehner has signaled that Republicans could accept $40 billion in cuts.

While a shutdown lasting just a few days might be quickly forgotten, a longer one would quickly become messy, thanks in part to two seasonal issues that didn't bite during the 1995-96 closure.

A shutdown would delay tax refunds for the 30% or so of filers who don't submit electronically, a senior administration said in a Wednesday call with reporters.

Spring kicks off the homebuying season and a shutdown "will have a significant impact on the housing market," the official said.

Among the agencies slated for closure is the Federal Housing Administration, which handles about 30% of the mortgage market vs. 12% in 1995. FHA-backed loans are available to buyers who pay as little as 3.5% down.

These and other impacts could take a noticeable economic toll if the shutdown grinds on. The Small Business Administration would stop processing new loans. Visa and passport applications would pile up, hurting the travel industry. And many government contractors would go unpaid.

Debt Ceiling

Even so, a spending standoff "shutdown"wouldn't approach the disruptions if the two parties can't agree on terms for raising the debt ceiling. The U.S. government will hit the current debt limit around May 16, the Treasury Department has said.

Republicans have tried to de-bunk the notion that hitting the debt ceiling would trigger a default, saying that Treasury could prioritize interest payments.

Treasury Secretary Tim Geithner pushed back, saying that even a failure to make Social Security payments on time would be akin to a default.

But if borrowers are being paid back with interest as the government wrestles with its debt demons, there's no reason for Treasury holders to panic, said American Enterprise Institute scholar Kevin Hassett.

That said, immediately halting the rise of debt would be "a big deal in the short term" for the economy, Hassett said.

While a debt-ceiling shutdown has never occurred, there could hardly be a worse time for one.

According to Congressional Budget Office projections, deficit spending in the current fiscal 2011 will account for 41% of every dollar in non-interest spending.

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