Government Shutdown Far More Dangerous Today

Congressional Leaders John Boehner and Harry Reid

By Greg Hunter’s USAWatchdog.com

It is looking more and more like the budget showdown between the Democrats and Republicans will turn into a government shutdown 2011 by this weekend. The Obama administration has already started to inform federal workers who will be required to still come to work and those who will be told to stay home.

The Washington Post reported yesterday, “About 800,000 of the 2.1 million federal workers nationwide were expected to be furloughed, with exceptions for national security and other essential employees . . . . “If there is a shutdown, it would have very real effects on the services the American people rely on, as well as on the economy as a whole,” Jeffrey Zients, deputy director for management at the Office of Management and Budget, told reporters at the White House.”  (Click here to read the complete Washington Post story.)

During the last several , there have been a series of short-term spending bills to keep the government running.  The latest includes $12 billion in cuts offered up by the Republican controlled Congress that will buy another week to negotiate.  This time, the President is digging in his heels according to a Washington Times story yesterday, “Without a short-term extension, lawmakers face two options: either reach a deal on a broad bill to fund the government for the rest of this year, or else have the government shut down as of midnight Friday.  “If presented with this bill, the president will veto it,” the White House said in an official statement of policy objecting to the House’s offer. The White House said it was “a distraction from the real work” on reaching a broader agreement.” (Click here to read the complete Washington Times story.)

If the government does shut down, it will not be the first time. There have been several government shutdowns since the early 1980’s.  The last one happened in the mid 1990’s.  Back then, the deficit was just under $36 billion.  By late 1997, the deficit shrank to just $17.3 billion.  In the mid 90’s, unemployment was low, the stock market was on fire without any help from Fed money printing, and the U.S was pretty much at peace.  The government shutdown was a political blunder for the Republicans, but the over-all economy didn’t miss a beat.

Fast forward to today, and you see a totally different U.S. economy with a government shutdown looming.  The deficit is $1.6 trillion, unemployment in real terms is high (22% according to Shadowstats.com), the stock market is being propped up by $75 billion a month in money printed out of the thin air by the Fed, and the U.S is bogged down in 3 separate wars in North Africa and the Middle East.   The stakes could not be higher, and the damage caused by a shutdown could not be more troubling.

Hundreds of thousands of federal workers and military personnel will not be paid.  Government loans by the FHA, Fannie and Freddie will probably grind to a halt, further depressing the real estate market.  Plenty of other non-essential government entities such as parks and museums would close.  The size of the problem to the economy would depend on how long the government is shutdown.  Yesterday, The Baltimore Sun reported, “Officials and analysts said a shutdown that lasts only a few days would be unlikely to have a significant impact on state government operations, largely because federal funding is often distributed to local jurisdictions in advance. But if the closure dragged on for more than a week, they said, the situation would become far more challenging.  Among the top concerns for local officials are the tens of thousands of federal employees in Maryland who would be furloughed. If those workers are not paid, a two-week shutdown could reduce the state’s income tax revenue by as much as $40 million, according to a state estimate.” (Click here for the complete Baltimore Sun Story.)

Multiply the Maryland projections by all 50 states (by a more or less in lost state income tax) and the budget picture is not pretty.  Keep in mind, most states are struggling with big shortfalls.  In places like Illinois, California, New Jersey and Texas, the budget problems are extreme.  One thing is for sure, a government shutdown will be a drag on an already struggling economy.  We just don’t know how big or how long the drag will be.

Comments
  1. James M

    The government workers will not survive the breakdown, They will continue the ponzi scheme with the help of the EU, Australia, Canada and Japan. Japan will first default but with the rest of the countrys they will run the dollar till the end. They can stretch for about 5-10 years and it is game over. Speculators will reason the dollar dead via QE and confidence will wain slowly but surely. Japan dumps dollars to rebuild. China will sell off because of Libya and Russia will supply China in Yuan trades. Syria will cause global outbreak of wars unprecedented in history and it will go nuclear……….maybe, probably. WWWIII

    • Greg

      Thank you James and Hoppe.
      Greg

  2. Hoppe

    Yet another example of why the States should be allowed to keep most of their citizens revenue without the round trip to D.C. Except for national defense and a few other Constitutional services, the fedgov shouldn’t be handling our money at all.

    Maybe this will be a good practice drill for what will happen when the dollar collapses.

    Still I like what Will Rogers had to say; “Be thankful we’re not getting all the government we’re paying for.”

  3. Ron

    Mr. Hunter,

    I appreciate the blog and read it daily. One point on your statement, “Multiply the Maryland projections by all 50 states (by varying )and the budget picture is not pretty.” Maryland is a “company” town for the Federal government, so I don’t think this math works as the other states don’t have nearly as large a percentage of affected employees.

    Regards,

    Ron

  4. Norm Ezzie

    President Obama knows exactly how to respond to this “crisis”- go on vacation!

  5. Art Barnes

    Greg, its all political, just more of the same from our esteemed professional politicians playing games. Both parties want to be in the position to blame the other for any shutdown. Another reason is the Republicans want to claim they got the budget reduced even though any reduction we all know will be a drop in the bucket, and for that drop they will agree to raise the debt ceiling that the democrats are salivating for – just more of the same bull crap from our Washington elite.

    Assuming it is shut down it will only be a day or two with no real inpact on the economy. Just enough for the MSM to make them and the event even seem more important than they really are. Can’t you see the MSM all over Washington this weekend lime lighting Congress on the front steps of Capital Hill? The Speaker and the rest of the idiots will be able to fresh up their makeup all weekend for the interviews of finger pointing. Make no mistake about it everyone of them will relish in the publicity of the weekend, then on Monday or late Sunday night breaking news will announce a deal has been reached and congratulations will abound climaxing by a Presidential hand shaking photo opt Monday morning with our hard working Congress and the Whitehouse getting the peoples business done. It will be a real dog and pony show the likes to which vaudeville would be proud. But behind the scenes the real deal made is this: A DEAL WILL BE STRUCK THAT THE DEBT CEILING WILL BE RAISED A TRILLION DOLLARS. The MSM will not mention the ceiling raise except as only an after thought and that it is of no real consequence to the economy, a simple accounting principal or technique if you will.

    The debt ceiling raise will have a negative impact on the economy 10 times greater than a government shut down for a few days. Simply stated, this whole shut down “crisis” is designed to place the celing raise in without any media attention or public awareness; a great wag the dog move. Higher debt ceiling means more spending, more interest on the debt, more inflation, more dollar devaluation, and more of the same o’ same o’ leading to a faster destruction of the county than what the pace is now.

    • Art Barnes

      I forgot to add that its too bad Congress doesn’t shut down during a shut down. If it did we all need to vote for it!

    • Greg

      Art,
      Your trillion dollar number for the debt ceiling rise is backed up by “Bond King” Bill Gross. Thank you for your comments.
      Greg

  6. Jerry

    Hi Greg–

    With the looming government shutdown, I put these thoughts to pen.

    Imagine there’s no government
    It’s easy if you try
    No safety net below us
    About us only lies
    Imagine all the people
    Working for no pay

    Imagine there’s no country
    It isn’t hard to do
    Nothing to buy or sell for
    And no NFL too
    Imagine all the people
    Living with no means

    You may say that I’m a schemer
    But I’m not the only one
    I hope someday you’ll join us
    And the world will be broke as a bum

    Imagine no possessions
    We sold all that we can
    No need for greed—we’re hungry
    A brotherhood of scams
    Imagine all the people
    Stealing from the world

    You may say that I’m a schemer
    But I’m not the only one
    I hope someday you’ll join us
    And the world will be broke as a bum

    Peace

    • Greg

      Jerry,
      I think John Lennon would be proud!
      Greg

  7. markm

    Hey Greg,

    I did not know that you were a closet liberal who is FOR deficit spending, and who also believes that gubmint spending is the origin of economic growth. My previous sentence seems to sum-up your theme for your article.

    In order to save our republic, gubmint workers must be terminated. Yes, this will create short-term economic problems; but it must happen!

    markm

    • Greg

      MarkM,
      You know I am neither Democrat or Republican. I was was just pointing out the shutdown will be rough. The budget needs to be cut by trillions, and the Fed needs to be abolished. Your point that big changes need to be made is well made and well taken. Thank you for your comment and support.
      Greg

      • markm

        Hey Greg,

        My opening statement was harsh–sorry about that.

        Cutting spending, any spending, is good. More budget cutting is much better. The haves of our society (gubmint workers) need to be wiened of the teet. Don’t feel sorry for them as they have had a free ride for too long.

        markm

  8. LD

    Now wait a minute. There could be a silver lining here.

    We could make this an bi-annual furlough (perhaps 3 weeks in Spring and 3 weeks in Fall) and plan the rest of the year around it. Everyone would need to plan to get their dealings with government accomplished during the “open for business season.” If necessary, jobs could be restructured so that temporary workers could be hired as needed to get out the wash. How about hiring some seniors who want to work part time?

    Government wins because this refocuses priorities and it reduces the size of government. It would improve productivity and free-up and liberate workers. Government would get a needed vacation from the burdens it carries during the year. Government employees win since they get the gift of time to improve the quality of their lives and of their families. Americans win because all the time, effort and hysteria surrounding government and politics can be channeled toward more fruitful life endeavors that lead toward the overall improved happiness of the Nation.

    Perhaps more Americans will plant some gardens in Spring and have some nice harvests in the Fall. Perhaps there might be time to smell a fragrant rose or two and renew relationshps and make new friends.

    • Greg

      LD,
      I think you have some very good ideas!!!
      Greg

  9. Jay

    As one rally goer said to his congressman. “Shut the sucker down.”
    Our founding fathers never wanted us to have a federal government dominating the individual states in the first place. The only reason they went along was because they were at war with England, which is why the Federal government wants to keep America in a perpetual state of war to justify its existence. But don’t just shut down the Federal government. Shut down Federal taxes too because they just go to the Bank of England and it’s 12 federal reserve branches to control America externally. If the states decide they need to defend themselves, then let the states work together as necessary without a federal master that hates the constitution and states rights.

    • Greg

      Bravo Jay!!!!!!!!!!!
      Greg

  10. Diane Carol Mark

    Hi Greg,
    The good news is a new dependency glares in our face. Why are we not more independent from our government?

    This situation sounds like “negative attention” –since the government has been out of the news due to environmental catastrophes in Japan and the Wars of the East, they are creating a situation to garner attention. Amazing. Ignoring them would be the proper response.

    :) Diane

  11. cowboy

    Federal meat inspectors will not work so slaughter houses will shut down. No meat for sale

    • Greg

      Cowboy,
      Good one. I didn’t even think about that!!!
      Greg

  12. g.johnson

    ok, government shutting down is not a bad thing in and of itself. only if it becomes and excuse for bad things like martial law, confiscation of social security funds, general raising of prices at a hyper inflationary rate, suspension of the constitution (pretty well shot anyway) etc..

    best case? those 800,000 fed employes are laid off permanently and those jobs are not refilled.

    $1.6 trillion deficit eh? ok, if you say so, but hey, didn’t we just give goldman and sachs and a bunch of their robber baron buddies several trillion just a few month ago as punishmen for looting the nation’s economy? how bout you just go get it back from them?

    wonderful though, not holding my breath.

  13. scotthope

    Good post! Can’t believe the GOP is being rolled by the Tea party extremists though!! GOP will pay a price at the next election since independent voters, in the middle, win elections.

  14. johnny freedom

    easy to solve budget problems all federal and state employees including president and governors and congress and senators will be payed mimium wage no retirement pay after all its not a career its an adventure and service to your country also any one caught stealing goverment funds gets twice the maximum penalty by law. 10% taxes on all corporations on total income no deductions take over the money printing and increase money supply by 2.5% a year,as money to spend into the economy and no taxes on any one who makes less than 1 million dollars a year then 10% tax no deductions.

  15. Jan

    The last time the government “shutdown” I was on a beach in the Dominican Republic. We thought we might not be able to get home. Cool! Call the staff and tell them to carry on, we would be home later. No such luck, it was settled and we had to board a plane and come home.

    I think this “shutdown” is much ado about nothing too. Political theater and as many have noted the debt ceiling will be raised in the dark of night without so much as a peep coming from the MSM. Congress will keep spending us into hell.

  16. Steve

    Greg, in speaking with your media and financial contacts, do any of them give you any sort of feel about a timeline for the federal reserve act ending and the treasury issuing it’s own monies based upon the country’s productivity? Or is there a feeling that the there will merely be a “reorganization” with the same power players in slightly different rolls yet the credit based system doesn’t change? Since the fed’s practices are principally based upon deception (i.e. low inflation, high employment whereas we have exactly the opposite), it doesn’t seem feasible for their role to continue in it’s present form. The visibility of their practices now are way too high given their recent disclosures via lending to foreign banks.

    You’ve got to have some feel in this area.

    • Greg

      Steve,

      My personal feeling is “Fed no more” by 2015 and some horrific inflation getting there. Thank you for your question and comment.

      Greg

  17. Jan

    Show over. $500 B in spending cuts over ten years? Whoopee skip! The EPA with free reign and Planned Parenthood funded. Who wone here? Certainly not the American taxpayer. Business as usual, but the show kept the news channels full of dramatic fluff for days.

    I want to see the BREAKING NEWS Taxpayers screwed again, more at 11.

    • Greg

      I thought the same thing Jan.
      Greg

  18. M SMITH

    Greg, Americans got screwed again, both leaders caved to Obama & the progressives. One Dem member of congress said she would have to wait for contact from the K Street Bunch(Lobby Strong hold)for instructions to carry back to leader Reid. Both parties caved to planned parenthood & the EPA & it’s massive network of layers of committees that block private companies from bring our own resources to market. That means more people set idle as we have to import more of everything.

    Obama did the Dirtiest damn thing I ever have seen by a President,he used our Military personal as Pawns to push his own career above the well being of all family members of our people serving this nation. It was planned & it showed just how low he will go to push his programs to protect Unions & the Banksters. He has a lot of class & its all lower than rat shit.

    Boy the MSM could not resist the coverage, after surfing to CBS to FOX BIZ, both were useless except Freedom Watch which I do believe if they removed the restrains on the Judge, we would see more corruption exposed & just how Americans through the States could stop the federal gov & reverse years of unconstitutional intrusions on all of our lives. But until then, as Jim Sinclair explained years ago, to follow a plan & set your goals to be able to survive living off the Grid, I am close, but not yet ready & I hope I am not to late!

    As I said Greg, we Americans lost! We got to see how corruption & greed plus power leads to a solution that solves nothing but adds to the hardships heading straight for us! Obama better remember what he did will not be forgot by millions of Vets & Active Duty Military & their Families & friends of Vets, & honestly, I don’t think Obama cares one bit!

    Thank you Greg for letting me rant!

  19. mitchbupp

    no need to worry the corporations will still own congress’s ass it doesn’t matter if they work or not …. business as usual …no doubt …..

  20. Oldcoot

    The phrase “Too big to fail” is most likely what got us into this financial mess, and is most likely the means to fund Obama’s next campain. I noticed two more bank takeovers, and 28 for the year. Naturally these are small local banks that should have received the bailouts. Small businesses and farmers borrow from smaller local banks more than the TBTF jerks. The normal route of bankruptcy should have been allowed for the big guys. Huge bonuses were paid the big boys so as not to lose their great talent. This talent must be in “How to bilk the taxpayer”. It sure wasn’t in keeping their investors above water.
    I was hoping for the shutdown to show the people what hard times will be.
    Just think, Obama said he would veto any stopgap bill that would fund payment to our troops. In other words, they are non-essential. Where was the MSM on this little tid-bit.

  21. Jan

    I wonder what distraction will pop up and cover up the increase in the debt ceiling in the coming weeks? The major grandstanding is over, government is open for business the corporations and the banks are saved. Now they just need to raise taxes and cut programs that serve the people to insure bankers bonuses and tax free corporations.

  22. S. Bond

    The bills can be paid by printing money…The government shutdown is just political theatre!!!

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