econlife - What a Government Shutdown Does to Each of Us by Elaine Schwartz

A government shutdown is again in the news. The key date is December 21. If federal agencies without funding do not get their money by then, they have to follow their shutdown rules.

I suspect most of us will be affected. These are the facts:

Shutdown Agencies

Five agencies (blue) did get their Fiscal 2019 funding while seven (gray) did not. Those seven received a temporary reprieve from a CR (Continuing Resolution) that expires on December 21. If there is a shutdown, it’s the seven agencies that will be hit. And even then, not everything. It all depends on who is “essential.”

As for the numbers, we are talking about 750,000 government employees. Estimates indicate that 400,000 would work without pay and 350,000 would be furloughed. While the “essential” unpaid employees do get paid retroactively from new funding, those who are furloughed will not necessarily receive their back pay. But in the past, Congress voted to give them the money.

This potential partial shutdown sounds less catastrophic than the actual 16-day shutdown during October, 2013. At that time, suspended services included issuing new Medicare and Social Security cards. The EPA could not inspect 1200 different sites while the FDA postponed close to 900 inspections. The National Parks lost $500 million dollars in visitor fees and the Panda Cam went dark at the National Zoo. The IRS also had to turn away 1.2 million requests related to mortgage and loan approvals.

In the aggregate, economists believe shutdowns cost billions because of lost fees and pay to employees who were sent home. Then, to that government cost we can add the private sector where hotels near national monuments lose business, realtors have transactions cancelled, loggers cannot work in National Forests. Standard & Poor’s estimated a $24 billion hit to the 2013 GDP–a .6% slice of growth that was cut out.

Our Bottom Line: The Cost

The word “shutdown” obscures the massive impact. Summarized in one term, it sounds simple. But it is not.

I am reminded of what we have said before about the British seacoast. Quoting mathematician Benoit Mandelbrot, we pointed out that when you see the shoreline from afar, it looks like a smooth curving line. But look more closely at the coast–and at government shutdowns–and you recognize the details you need to know.

My sources and more: For the current shutdown basics, Bloomberg had a good article, the Committee for a Responsible Federal Budget had some history, and The Washington Post had some interesting detail. You might also want to read more about the three-day shutdown last January.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - What Census Takers Can Learn From Birdwatchers by Elaine Schwartz

On a South Australian beach, researchers placed thousands of fake terns. Arranging the birds in colonies of 460 to 1020, the scientists orchestrated a count…actually two counts. One would come from drone images and the other from birdwatchers. The goal was to see which was more accurate.

The winner was the drones.

When people counted the birds in the drone snaps, the results were 43% to 96% more accurate than what the birdwatchers reported. Because drones are increasingly used to gather data like whale populations in the Pacific and orangutans in Nepal, their accuracy matters. But we do have a second issue. Eagles have been observed attacking drones and bear populations have responded with heart attacks.

So, there is more behind a bird census than just counting. How you do it affects accuracy and the well being of the population you are measuring.

And that takes us to the 2020 decennial census.

The 2020 Census

We’ve been measuring the U.S. population every 10 years since 1790. Mandated by the Constitution, its basic purpose is allocating seats in the House of Representatives. However, we could say that the census is also an economic document. It costs the Congress money and provides data that tells where to spend money.

Cost

It is expensive to count more than 325 million people who live in 126 million households (2016). In 2000, the census cost close to $8 billion while in 2010, it was in the vicinity of $14 billion. Covering a 12-year life cycle, estimates for the 2020 census have ranged from $12 billion to more than $15 billion.

You can see that cost soars in 2020:



Spending

Whereas the stated goal for the 2020 decennial census is population and housing data, that is only the beginning. From there federal agencies can determine how an estimated $675 billion will be allocated. They just need the data to identify their target communities.

HUD for example uses income and housing information for its assistance programs. One source of that information is the ACS (American Community Survey). But the ACS is an offshoot of the decennial. Published annually, the ACS gets its “sampling frame” from the decennial.

There are countless examples of how the decennial data are used. Federal, state and local governments use the data to make spending decisions about education, highways, Medicaid..the list is unending. Meanwhile, even small businesses can decide where to locate and invest. They can get handy demographic information on customers and even where low income concentrations might get them preferential tax treatment.

Our Bottom Line: Accuracy

The big worry for the 2020 census takers is accuracy. Looking back at 2010, they tell us that they undercounted renters, the black population, Hispanics and children under five years old.

Looking ahead, they cite the following problems:



So, returning to our Australian fake terns, we just need to remember that how you collect the data matters for accuracy and well being.

My sources and more: My top recommendation is this Wired article on the bird watchers. But if you want to learn more about the decennial, the possibilities include articles from Brookings here and here. You also might go to the Congressional Research Service and of course, census.gov, here and here.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Everything You Might Not Know About Government Shutdowns by Elaine Schwartz

This really happened…

The September 30 to October 2 shutdown in 1982 started because the Congress and President Reagan “had other plans.” When the fiscal year ended on Thursday September 30, the House and Senate had agreed on a compromise. But because of a White House barbecue for the Congress and a Democratic $1,000 a plate fundraiser, there was no late night session. On Friday, the government shut down.

Shutdown History

The government used to remain open if the President and the Congress disagreed about the federal budget. Yes, sometimes agencies didn’t receive their yearly appropriations. But, assuming they would soon get their money, officials ignored the lapse.

It all changed with President Carter (1977-1981).

The Carter administration refused to ignore funding gaps. Their rationale was an amended version of the Antideficiency Act (1884) that said federal agencies could just spend what they were promised. If you didn’t get your allocation, then you were limited to essential activities. Only mandatory programs and those with longer term funding were not affected.

The result? Eighteen shutdowns.

For some gaps, the impact was minimal while with others we had hundreds of thousands of furloughed employees. The one constant was the huge variety of issues. Abortions, foreign aid, and the deficit were only several of the causes of a congressional impasse.

Do note that the shutdowns were caused by the “Appropriations Funding Gaps” in the following table. Also, the beginning of the government’s fiscal year is different from the calendar year:

Our Bottom Line: Shutdown Cost

The cost of a shutdown is tough to measure. Government revenue declines from closed national parks and tourism sites. Safety could be a problem when the Environmental Protection Agency and the Food and Drug Administration cancel inspections. Add to that mortgages that aren’t approved because the IRS halted income verifications. Think about the airlines, hotels, and wedding planners that lose business. And don’t forget “non-essential” government statisticians. During the 1995-1996 shutdown, the December employment report came out during mid-January.

Returning to the 2018 shutdown, you can see the cost is incalculable.

My sources and more: Vox had the perfect story of all 18 shutdowns if you want the details. Meanwhile, I found the ideal complements at CRFB’s cost discussion and from the Congress. However, if you just read one article, I recommend the NY Times story of the 1982 funding gap.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.