By Jourdan Brooks
Amid confusing terms like furlough, sequestration, the debt ceiling and the government shut downs, many people are left with lingering questions. How will this affect my job? How will I receive assistance if the government is shut down? What does the debt ceiling mean and what does it have to do with me? Has this happened ever before? And if I don’t work for the federal government will this have an impact on my job? With these questions floating around, it is best to start with an explanation of the crisis we are facing and what it means.
The words used most frequently by the media and political pundits are the “debt ceiling” and the “government shutdown”. “The debt ceiling is an aggregate figure which applies to gross debt, which includes debt in the hands of the public and intragovernment accounts. Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit budget deficits.” In a nutshell the debt ceiling is a monetary amount that is approved by Congress that allows the Treasury to pay back debt incurred by the federal government. Imagine that the dead ceiling is a credit limit that the government has to pay back in order to maintain their credit score and ability to continue to borrow funds and spend money. The government can continue to spend money and incur debt, because the debt ceiling only covers the debt already incurred by the government and not future debt. If the Treasury usurps the amount allotted to repay the debt, they are allowed to use “extraordinary measures” in order to satisfy the debt. Extraordinary measures allow the Treasury to finance the government’s expenditures until a resolution can be reached and the debt ceiling increased. Many speculate that if the Treasury were to exhaust their extraordinary measures that it would send the economy back into a deep recession.
Over the past 20 years there have been two debt ceiling crisis, one in 1995 and another in 2011. In 1995 the debt ceiling crisis caused the shutdown of the federal government from 1995-1996. When it happened again in 2011, it caused a huge problem for many financial institutions, including the stock market. The debt ceiling limit expired December 31, 2012 and the Treasury had to resort to “extraordinary measures” to cover the debt. Through the No Budget, No Pay Act of 2013 Congress voted to suspend the debt ceiling until May 19, 2013. The debt ceiling was raised to $16.699 trillion dollars in May of 2013, however, since then the Treasury has already had to use extraordinary measures to avoid defaulting on the debt. The Treasury only expected the extraordinary measures to last until October 17, 2013. On October 16, 2013 Congress finally agreed to extend the debt ceiling against until February 7, 2014.
Another immediate economic problem was shutdown of the federal government from October 1, 2013 to October 17, 2013. This shutdown occurred because Congress failed to enact an appropriations bill or budget for the fiscal year October 1, 2013 to October 31, 2014 or approve a continuing resolution in the interim until there was an agreement on the budget. The failure to enact the budget for the 2014 fiscal year meant that agencies and programs that received their funding from Congress were left without money to operate. This resulted in putting nearly 800,000 Americans out of work and forced another 1.3 million Americans to continue to go to work without getting paid. It also resulted in the suspension of many essential assistance programs and closed the doors to many federally run museums, parks and other public facilities. Furthermore, because the District of Columbia’s budget needs approval by Congress, the District was forced to have to use its reserve funds to keep the city running in the meantime, which was only enough to keep the city running for approximately 14 days. In effect, it brought the government to a screeching halt.
The basis of the delay in the appropriations bill for fiscal year 2014 was because conservative, Tea Party Republicans from the House of Representatives were pushing for a delay in the commencement of the Patient Protection and Affordable Care Act (also known as Obamacare). The Republican-led House of Representatives wanted to delay or significantly alter Obamacare, which took effect October 1, 2013. Both President Obama and the Democratic-led Senate were unwilling to approve a bill to diminish the purpose of Obamacare in any way. This resulted in a stalemate that lasted almost three weeks. As the stalemate waged on the Republicans tried to put forth resolutions to open up parts of the government and leave others closed, an effort vehemently rejected by President Obama. The President was unwilling to open up some government agencies and leave other Americans left at home without pay as the Republican party foolishly battled against Obamacare, a program which had already been approved by Congress and found constitutional by the Supreme Court. It seemed like the tug of war between the two parties was going to be a never ending saga that left the American people with to suffer the effects of the stalemate.
Finally, on October 16, 2013 Congress agreed to fund the government until January 15, 2014. The bill passed the Senate with 81-18 vote, all the Democrats and 27 of the Republicans voted in favor. In the House it passed by a 285 to 144 vote, with all Democrats in favor and 87 Republicans in favor, and 144 Republicans against the bill. President Obama signed the bill into law just after midnight on October 17, 2013.
Now that the government and its employees are back to work, we are left to wonder what effect did the shutdown have on our economy. The White House estimated that each week that the government was shut down cost the United States Economy $10 billion dollars. Essential agencies that were shut down during that time period were unable to perform any of its essential tasks. Financial markets suffered tremendously and the value of the U.S. dollar is significantly waning as a result of the shutdown, according to Reuters online. The government has yet to release pertinent data information for investors, according to International Business Times, which may be more harmful than helpful in the end. These are just some of the effects of the government shut down with the lingering effects still unknown. The short term effects were felt by our communities immediately. No one is certain how long it will take for the economy to recover from this partial shutdown or if this same gridlock will occur again when the budget is up for renewal in January of 2014. What is certain is that whatever decisions that are made by our government significantly impacts its’ citizens and we must be knowledgeable about what is going on around us. An informed citizenry is a powerful one.