The United States Government has officially shut down. This gives the impression of anarchy. When anything else “shuts down” they don’t continue on doing the “essential” activities. A government shutdown means something completely different. So first I’d like to assess the magnitude of it.
Mother Jones lists 48 ways the government shutdown will “screw you over”. Read past the juvenile scare language and extreme stretching of the truth and we have a pretty good list of the total effects of the shutdown, and they’re pretty dismal. What gets shut down is the non-essential services as determined by the Office of Management and Budget – and pretty much everything government does according to them is essential. It is so easy to exaggerate the necessity of every government program until it looks like the world is crashing down. But if we stop for a second to get a sense of magnitude, it just isn’t that big a deal.
According to Mother Jones, the shutdown screws over anyone who gets sick because “The Centers for Disease Control and Prevention (CDC) would lack funding to support its annual flu vaccination program.” In actuality it inconveniences a small faction of the population who use this program. Flu vaccinations have not disappeared off the face of the earth, so most people who were going to get them still will. Not a big deal.
It also says that “400,000 Department of Defense employees will be given unpaid vacations” It forgot to mention that the Department of Defense is the largest employer in the World – employing 3.2 million people. So that’s 1/8 of their workforce. I’m not saying it’s good. Those workers aren’t exactly low income but I’m sure they’d prefer to work. But it is not that big a deal.
“The Occupational Safety and Health Administration will halt regular inspections.” If you you think that health and safety is not positively correlated with economic growth – and that businesses can radically reduce the health and safety of workplaces only to change them back when regular inspections continue – then this should scare you very much. If you’re a bit more realistic, then it is not a big deal.
There are a lot of delays, cutbacks, and furloughs in a very small fraction of total government activity, which is still a fraction of total economic activity. The United States government has shut down 18 times in the last 40 years -- usually because of budget problems like what is happening now. The longest one lasted 21 days. So when it comes to magnitudes, this is in the running for most important thing to happen to the United States this year, but not a clear winner. The near-attack on Syria would probably be the winner.
Is it bad? I contend that it almost certainly is.
The programs that are shut down – got funding reduced – postponed – are a mishmash of cased where
1) government is solving market failure
2) government is crowding out what markets could do all by themselves and
3) government is doing something that just shouldn’t be done
The intuitive answer is that if category 1 is shut down that’s bad, and if 2 or 3 are shut down that’s good. But I think it is all bad in this case.
The reason that 2 and 3 are bad is because they’re being shut down temporarily.
2) Markets simply won’t have time to respond by picking up the government’s slack. Infrastructure has to be built. Investments need to be made. It would be great if government quit doing those things indefinitely, but we all know that business as usual is on its way. Government is crowding out what markets could do better, but markets aren’t going to respond very much when governments shuts down for a few weeks max.
3) When government does something that shouldn’t be done it usually isn’t because those things it is doing aren’t valuable. It is because the resources it is employing have higher valued alternative uses. Parks, water fountains, golf courses, and NASA all seem to be good things. But the relevant question is what is the opportunity cost? What would we do with all those valuable resources otherwise?
Since the government shutdown is temporary, the opportunity cost is near 0. Furloughed workers aren’t going to find new jobs. New buildings aren’t going to be built. New investments aren’t going to be made. The resources aren’t going to other, higher valued places, they’re going idle. There’s nothing good about that.
That’s my basic take on the government shutdown. The shutdown began a little under a week ago, so it is late. I had some reading to do before I got a decent general understanding of what is going on. I live in Canada now. Instead of government shutdown we have frequent labor union strikes – which appears to be in effect no different from government shutdown.
