WASHINGTON — The odds are pretty good that the federal government will shut down at the end of the month, with all but essential federal agencies abruptly stopping their work.
That will have an impact in Minnesota – as it will to a lesser or greater degree in all other states. And that impact will grow the longer it takes for the federal government to reopen.
Minnesotans will feel some of the effects of a failure by Congress to fund the government right away:
- Passports will not be issued or renewed.
- Seniors will not have their applications for Social Security benefits processed, although payments to existing recipients will continue to be made.
- Social Security recipients with questions about benefits will find that no one at the Social Security Administration will be there to pick up the phone.
- Medicare applicants seeking information about benefits under the program also won’t be able to reach anyone.
- Minnesota companies with federal contracts – which account for billions of dollars in revenues every year – will find that their applications for new contracts are on hold. Some with existing contracts may find their payments have stopped until the federal government reopens.
- Federal courts would remain open, at least for a while, because they would be funded by court fees. But that revenue would eventually be exhausted and those courts may put off hearing civil cases.
- National parks would remain open, but restrooms and other facilities would be closed.
But perhaps the most severely impacted would be the state’s federal workers, who if deemed essential would work with no pay. If not considered essential, they would be furloughed with no pay. According to the Office of Management and Budget, there are approximately 17,000 federal workers in Minnesota.
Those workers will eventually receive back pay, but for many a shutdown that lasts even just a couple of weeks could hurt their ability to pay mortgages and other bills.
Congress has failed to pass any of the 12 spending bills needed to fund the government in the new federal fiscal year, which begins Oct. 1, so the federal government is likely to shut down just after midnight on Sept. 30.
And the prospect of passing a short-term bill, called a continuing resolution, that would fund the government appears dim, with a rebellious faction of the most conservative members of the Republican-controlled U.S. House making demands that the Democratically-controlled U.S. Senate and White House are certain to reject. Meanwhile, House Speaker Kevin McCarthy, R-California, is reticent about brokering a budget deal with Democrats for fear of losing his gavel.
So, an almost total shuttering of the federal government is likely imminent.
“We have a broken budget process and a closely divided and polarized Congress,” said David Wessel, a senior fellow of economic studies at the Brookings Institution.
Wessel said that at this point it is hard to say how long the federal government could be shuttered.
“Is there a chance there could be a long shutdown? Yes, this is not something that is easily negotiated,” he said.
Some recent shutdowns have only lasted a day. Others have lasted longer. The last one began at the end of 2018 and lasted 35 days. That shutdown was a result of a dispute over former President Trump’s border wall funding and was considered a partial shutdown because Congress had approved five spending bills.
Besides affecting the lives of Americans and the functioning of state and local governments who would suffer delays in receiving federal grants – including those for large programs like food stamps and Medicaid – a shutdown “undermines people’s confidence in government,” Wessel said.
There’s also an economic impact. Goldman Sachs has predicted that a government-wide shutdown would reduce the nation’s economic growth about 0.2% each week. Growth would rise again after a shutdown’s end, but the disruption could result in job losses – at least temporarily.
“Fortunately, the economy is pretty strong right now, but that could change,” Wessel said. “If (a shutdown) goes on for a long time it’s going to hurt.”
The Minnesota Department of Management and Budget identified other impacts, based on past shutdowns.
It said those seeking mortgages backed by the federal government, such as FHA and veteran’s loans, would see delays. So would businesses seeking loans from the Small Business Administration and investors seeking information from the Securities and Exchange Commission and other government agencies that routinely report on the nation’s economy.
The MMB also said farmers might lack the data they need from the U.S. Department of Agriculture to plan for next year’s planting season or to get technical assistance if Farm Service Agency offices are closed. And Minnesotans living on tribal lands could lack funding needed for health care, law enforcement and other services.
“A lack of federal funding could put states in a position of deciding whether to provide certain essential services typically funded in whole or in part with federal dollars with no guarantee of federal reimbursement,” the MMB said.
During the last shutdown, parents took their children to certain Head Start centers only to find them closed because they were unable to renew their contracts with the federal government. That’s expected to happen again.
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