It looks like the House of Representatives may pass a short-term extension of the debt ceiling but not address the ongoing government shutdown. This might mean a perverse outcome — a government shutdown that lasts longer because the prospect of a payments crisis is delayed.
And that means that the negative effects of a government shutdown are likely to build. A lot of government agencies have an ability to paper over a short-term shutdown — for example, by relying on extra funds they had left over from the previous year.
The longer the shutdown goes on, the less workable that approach will be. Here are a few ways in which the shutdown will keep getting worse if it goes on for several more weeks.
Federal courts. So far they have stayed open during the shutdown, essentially by searching under the couch cushions for money. Federal courts have announced that they can stay open until Oct. 17 or 18 by using a combination of fee-income and previous appropriations not tied to a specific fiscal year. After that, they’ll have to close, stalling any federal trials.
WIC. Unlike most means-tested entitlement programs, the Women, Infants and Children program, which provides nutritional assistance to pregnant women and newborn babies, is funded through the discretionary budget. That means it gets no money if the government is shut down. So far, it’s been able to operate by using reserve funds, and the Department of Agriculture has said it will be able to do so through October. The future after that is uncertain.
Federal workers. “Essential workers” — well over a million of them — have to keep working during the shutdown. They’ll eventually be paid for their work, but the government can’t actually issue them paychecks until the shutdown ends. In most cases, that’s been an academic issue so far, since we haven’t had a scheduled pay day for most federal workers during the shutdown.
That will change Friday, when many “essential” federal workers will only get 60% of their normal paycheck for the work period that ended on Oct. 4. Four of the 10 business days in that pay period fell in October, during the shutdown. Other federal workers are supposed to be paid on Tuesday, Oct. 15 and will get a similarly short paycheck. And if the government is still shut down by the time the next pay day rolls around near the end of October, these workers won’t get any paychecks at all.
Amtrak. Amtrak has said, vaguely, that it will be able to continue operating in a “short-term” government shutdown and that it could continue normal operations for “weeks.” But it’s not clear how long a company that lost $US1.2 billion last year and relies on heavy subsidies by the Department of Transportation can keep running fully operational.
Mortgage-loan approvals. A lengthy federal government shutdown could also disrupt the housing market — particularly with large-scale mortgage approvals. According to CNBC, so-called “jumbo loans” (mortgages with values exceeding $US417,000) are becoming more complicated.
Many lenders won’t approve “jumbo loans” without getting tax verification from the IRS, a process that has been halted because of the shutdown. Even if they are approving the loans, all of the lenders will have to obtain that tax information from the IRS, which makes the loan inherently riskier.
The IRS’ absent tax-verification processing has also affected, for example, credit-card seekers and small business owners applying for loans.
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