The government will shutdown Tuesday if the Senate is unable to pass the two amendments that the House made to the budget Saturday. These amendments would allow for the delay of the implementation of the Affordable Care Act.
Economics professor Michael Hicks, also director of the Center for Business and Economic Research, explained what a government shutdown means and what it would do to the economy.
Q: What exactly does the government shutdown do?
A: ... The government reaches its borrowing limit and can no longer pay government workers to do the things they do. When the end of the fiscal year, which is [today], hits and the U.S. Congress has not voted to authorize the executive branch’s agencies to keep on spending on the new fiscal year [Tuesday] — unless there is an agreement on a budget — the government shuts down. Or sometimes, more frequently, ... they’ve had a continuing resolution, which means they can spend as much as they have the year before.
Q: Are they not able to do what they have been doing for the last six years and just pass a continuing resolution again?
A: No, they can, they just don’t agree to. Each of the times the government has reached a continuing resolution in the past, since [President Barack] Obama took office in 2009, there has been no budget passed. So in each of the years since then, we’ve authorized government spending through a continuing resolution, and that’s not satisfactory to a number of members.
Q: Who will be impacted by the government shut down?
A: Clearly, the most likely to be impacted by a government shutdown immediately are those who are being laid off. So nonessential government workers will be affected immediately, [because] they will not show up to work Tuesday morning.
Q: Will the shutdown impact Ball State students?
A: So, will it stop the processing off some federal Stafford loans? It probably won’t. Most of those have already been processed. Ball State students are very affected by the debate because you all are about to be tax payers, and future tax payers, in particular, are going to be affected by the debate.
Q: How will the economy be affected by the shutdown?
A: It depends on how long it lasts and what results from it. In the past, this has occurred numerous times either in last minute negotiations or government shutdown. There has been no lasting affect on the economy, maybe not even a temporary effect.
Q: Will any money be lost because of the shut down?
A: Well no, ... just that tax dollars are not sufficient to pay for all of the things the government is doing. That has been the case for the last six years, so the government has borrowed. Sometime in the next few days or weeks, we will also hit the borrowing limit. That borrowing limit means the federal government has to spend only what it takes in through tax dollars, which is no where near enough to pay for Medicaid and military spending, among other things. And when that happens, we stop paying our bills.
Q: Obama mentioned that failing to raise the debt ceiling would be more devastating than a government shutdown. Is that true based on what you are saying?
A: Think about it as a credit card bill. Each month, you pay principle and interest on that credit card bill, so right now, 20 cents on every tax dollar of all tax dollars of any type that go to the federal government are spent on servicing the debt. ... Then, the rest goes to all of the other things we have. ... If he elects not to pay the interest on the debt, the costs of borrowing money in the future will rise profoundly. ... This is high states negation, so if we actually hit the debt ceiling and it lasted, and we didn’t pass a new spending bill, that could be really devastating in our ability to borrow.
Q: Will Americans face this problem in the future?
A: This debate is not going to go away because we are maybe $15 [trillion], $16 [trillion], $17 trillion in debt, which is above the value of everything made in America in a given year. So the amount of spending the government undertakes each year is more than it’s bringing in, so each year that debt is rising. We’re just going to have to reconcile ourselves to a long period of time where there is less spending and more tax dollars.
