What the US gov’t shutdown means?

As of Sunday, January 13, the partial shutdown of the US government would be 22 days and counting. It has been news in all media all over the world almost every day and the accusations and stand-off between President Trump and the democrat-controlled Congress led by Speaker Pelosi is very interesting.

The immediate and medium-term domestic effects of the shutdown are well ventilated and discussed, but not the international repercussions, as there is the presumption that this will not really last long as this is only a partial shutdown.

In US politics, government shutdowns happen when Congress and the Senate fail to pass sufficient appropriation bills or continuing resolutions to fund federal government operations and agencies. Or when the president refuses to sign into law such bills or resolutions, and the Congress and Senate do not have the votes to override the president’s veto.

In the current situation, Congress passed an appropriations bill but the Senate did not pass or concur with it because it did not include the $5.3 billion Trump wanted for the initial funding of the $25-billion border wall between Mexico and the US. Neither side of the impasse is willing to budge, so federal agencies with over 800,000 employees have not and will not be paid until the shutdown is resolved. National Museums and Parks have to be closed and even TSA personnel at the airports are on paid/unpaid leaves.

There are more than 3.2 million federal employees, so the 800,000 are about one-fourth of that. Around 420,000 of them will not get paid for the duration of the shutdown, so some are already looking for other jobs, since many are living from paycheck to paycheck. The other 380,000 plus, are on unpaid leaves and may be able to get backpay for the days still covered by their leaves.

It is a good thing that essential services like police and healthcare are not included, and all agencies under the state and city governments are also not affected.

It is estimated that at least $200 million per day in expenditure is foregone during this partial shutdown, half from personal expenditures and half from agency expenditures. Half will probably be recovered when the shutdown is over, so in terms of impact on the national economy or GDP, it would be no more than .1% of 1%.

There would be opportunity loss in terms of delayed projects especially if the programs or projects have time bounded productivity implications like research.

The insignificant economic effect in the international scene so far is not giving sleepless nights to other governments in other countries. But if it lasts long enough to affect US trade, monetary and fiscal policies with other countries; we can be sure these countries will react.

Or when this shutdown will impact the political decision-making and policies of the US government towards the Middle East/Syria problems, the South China Sea dilemma, the Russian push in Eastern Europe, and US pre-eminence in the democratic world.

From a broader perspective and in reality, the government shutdown is not really the main issue. The main issue is the way Trump is running the government like a fiefdom and getting his way. The border wall is not the solution to the immigration problems, and the facts and data he has presented are not validated.

Border crossing in the south is at an all-time low, more drugs and criminals are entering through airports and seaports, and Canada has a longer border with the US than Mexico. Trump needs this stalemate to divert from his other damaging issues, And the Democrats wants to make sure he will not win a reelection in 2020.