Republican Shutdown Shuts Down The Economy -- So Do The Cuts They Demand

Here we are only four months into Republican control of the House of Representatives and the government is shutting down! When you give power to people who hate the government, what do you think they're going to do? Since the election the Republicans have been itching to gut or shut the government. It has been a drumbeat that they either get everything they want or shut it down. And getting everything they want guts the government.

Either way our economy takes a big, big hit.

A Continuing Resolution Continues

What is happening in Washington is that the government has been operating under a "Continuing Budget Resolution" that expends the last budget until a new budget can be passed.

We have a normal budget process, but Republicans refuse to follow it. Normally a "Continuing Resolution" continues the current budget until a new budget passes through the budget process. That's why it is called a Continuing Resolution.

But this time Republicans are holding us all hostage to their demands, saying, "We'll shut down the government if you don't agree to big, big changes" that are made outside of the normal budget process. They want dramatic cuts in the things We, the People (government) do for each other, such as investment in infrastructure, unemployment benefits, research, disease control, transportation programs, etc. They are even cutting the Social Security Administration - the people who get you on the list when you are 65 and send out the checks! They are demanding that no compromises be made, they want the government gutted or shutted.

No Compromise -- Begging To Shut It Down

Conservatives say they will accept no compromises in their demands, they want the government gutted or shutted and they want that right now. NPR recently took a look at the conservative frenzy [1] to shut down the government,

On Monday morning members of the conservative Tea Party Nation group received an email with the rather unambiguous subject line: "Let the Government Shut Down!"

... In a county full of seniors and retirees, the conservative wing of the GOP is the ascendant force of local politics. And its members are in no mood for compromise -- at least for now.

Here is conservative Town Hall's take on it: "Shut It Down!"

CNN report, Tea Party: Bring on a government shutdown [2],

...Tea Party supporters, including some members of Congress they helped elect, welcome a possible government shutdown as soon as midnight Friday. Bringing to a halt what they consider to be a bloated and misguided federal government would be a tangible success for their citizen activism that claims allegiance to no single party.

Their strategy: force a shutdown, and then blame the people who are trying to keep it open.

So what happens to our economy if they get a shutdown, and if they get their way and gut the things We, the People -- our government -- does for us?

If They Shut Down

If they shut down the government in the middle of a very fragile recovery, our economy will take a huge hit.

AP: Obama administration: Shutdown would hurt economy [3],

The Obama administration is warning that a government shutdown will have broad economic impact, halting the processing of tax returns, reducing access to small business loans and limiting access to government-guaranteed mortgages during peak home buying season.

800,000 government workers would be laid off, affecting the economies of areas where they are employed,

... somewhere in the vicinity of 800,000 workers will be affected. Congress and the judiciary branch will also be subject to a shutdown.

The Federal Housing Administration, which guarantees about 30 percent of home mortgages, would stop guaranteeing loans. The issuance of government backed loans to small businesses would be suspended. And processing of tax refunds would halt for those who filed paper forms.

Some even estimate a shutdown could trigger a second-dip recession. In Prolonged Government Shutdown Could Wither Confidence And Even Trigger Recession [4], a HuffPo report warns,

An extended federal government shutdown could devastate the U.S. economy by dealing a blow to Americans' confidence, experts said Tuesday.

Already, Americans face a host of economic woes. The unemployment rate remains high. Home prices are still falling, aggravating a widespread foreclosure crisis. Oil prices are rising, pushing transportation costs steadily higher and tearing precious resources from the economy.

In this context, a prolonged federal shutdown would drain Americans' confidence in their government, hobbling spending, borrowing and investment -- and pushing the economy toward recession, said Mark Zandi, chief economist of Moody's Analytics.

Here are just a few examples of areas where the economy would be affected:

Government Contractors- businesses that rely on government contracts for survival would see their cash flow dry up after even a week of shutdown as payment processing ceases.

Tourism - many areas around national parks depend on tourism dollars for their livlihood. This would dry up immediately.

Food Safety - as government inspections of meat and other food products cease, deliveries to supermarkets would stop.

The Rest Of What Government Does -- courts, ports, infrastructure, investment, housing guarantees, regulation enforcement and the rest of what government does helps keep our our economy operating.

If They Get What They Want

If they get what they want and gut the government, our economy will take a huge hit.

Last month, in Budget Cut Job Losses Will Undo 2010 Job Growth [5], I referred to Goldman Sachs, Moodys and other estimates of the job losses that budget cuts would bring, and pointed out this would undo the job growth we saw last year,

So will these cuts cost 200,000, 700,000 or a cool million jobs? Either way it is the wrong direction. This chart shows last year's private sector job growth. 1.3 million total -- not even enough to keep up with the new people entering the labor pool. Congress and the administration are discussing whether to knock 200,000, 700,000 or a cool million off of that, instead of how to create new jobs and grow the economy.

Remember How We Got Here

The budget deficit is the result of tax cuts for the rich and increases in military spending. We just extended the tax cuts for the rich, and there are no proposals to cut military spending in the pre-shutdown negotiations. The discussions are only about how much to hurt regular people, while protecting the wealthy and Wall Street.

Now the Republican budget proposals give more tax cuts to the rich and continue to extreme, massive, astonishing, incredible, huge, stratospheric level of military spending -- more than all other countries combined.

We should be discussing tax increases on the wealthy, cuts in the bloated military budget, a "Medicare-For-All" health care plan that takes care of people and removes the burden from businesses and investment in jobs, infrastructure, education and R&D to grow our economy.

The ideology of a few billionaires who have the ability to convince people government shouldn't stop them from fleecing us has spread so far that people have lost sight of basic sense. Many people have become convinced that government is in our way, just because these billionaires have been running a propaganda campaign trying to get it out of their way. Nothing could be further from the truth, and we are about to find out the hard way.