October 1, 2013 (TSR) – The White House budget director has ordered federal agencies to begin closing down after U.S. Congress failed to pass a budget to avert a government shutdown at midnight Monday to deal with the budget spending bill.
The move will have an impact on the daily lives of Americans, jeopardizing the paycheques of more than 800,000 Americans, as well as the country’s economic recovery.

The rules governing the shutdown say federal workers will be classified as essential or non-essential, so that key government functions can carry on in the event of a fiscal crisis.

“Agencies should now execute plans for an orderly shutdown due to the absence of appropriations,” said Sylvia Mathews Burwell, director Of the White House Office of Management and Budget in a memo on Monday.

The order was issued 10 minutes before the US government officially ran out of money after a day of angry brinkmanship between the Republican-controlled House of Representatives and the Senate, where Democrats have the majority.

Burwell urged Congress to pass a temporary operating budget as soon as possible to allow departments to reopen.

The U.S. Congress hasn’t passed any of the annual bills that fund various government agencies, so it has had to rely on stopgap measures that are known as continuing resolutions. The government needs to pass another one as soon as possible to keep the cash flowing beyond Sept. 30.

“We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year, and to restore the operation of critical public services and programs that will be impacted by a lapse in appropriations.”

Mark Zandi of Moody’s Analytics said a month-long shutdown could take up to 1.4 percentage points from growth.

Air traffic control, the military, prisons, border security, mail delivery, anything related to national security and public safety, social security cheques, emergency medical care, and food safety inspection are examples of things that would be unaffected.

The impact will be scattered.

Some 800,000 government workers could be told to stay home and go without pay. However, they might get paid retroactively once the shutdown ends.

Those missing paycheques would have an impact on individual bank accounts, but depending on how long the shutdown lasts, the loss of income could also affect the broader economy. The affected public servants would essentially be unemployed, pumping less cash into an economy that very much needs it.

The economy would also take a hit because the shutdown costs money, to carry it out, and to start the government back up again. The last two shutdowns, which took place weeks apart in late 1995 and early 1996, cost taxpayers $1.4 billion, according to estimates from the Office of Management and Budget.

400 National parks and museums as of today are closed, hurting tourism in some areas. Various permit services, such as the issuing of passports, would halt, hurting businesses and travelers.

Small business loans will not be processed, government-backed insurance for home loans will not move forward, and some tax refunds will pile up.

About 400,000 civilian defense workers would stay at home, slowing down contracts with private suppliers.

The largest impact would be in the federal hub Washington D.C., which could lose $200 million a day, Stephen Fuller of George Mason University told the Washington Post.

The shutdown means city services such as garbage collection, street cleaning, motor vehicle offices, and libraries will be on hold or closed.

The government spends around $60 billion a month more than it brings in. The money that is already committed and so funding must be found or something else must give.

Darker Times Loom

The government shutdown isn’t the only fiscal crisis looming for the U.S. The other is the debt ceiling, which is far more concerning.

Under U.S. law, the government must stay below a certain debt limit and Congress must pass legislation to allow the government to exceed that limit. If it doesn’t, the government can’t pay its bills and would have to default on its legal obligations.

That would have “catastrophic” consequences on the economy, according the the U.S. Treasury, which expects the government to reach the debt ceiling — currently sitting at around $16 trillion — by mid-October, and if the statutory cap on borrowing is not increased, it will have to withhold some cheques.

That could mean missing payments for salaries, retirement and health benefits, or even debt service – though that might not show up until the end of October.

The U.S. federal government has never defaulted before so no one knows exactly how severe its effects could be, but there’s little doubt it would cause severe economic damage.

Congress has until Oct. 17 to figure out a plan for the debt ceiling.

The clocks in Washington are ticking loudly. The Empire is in dire straits.


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