The US authorities could not avoid another shutdown because of the inability of the Democrats and Republicans to agree on the draft budget.
On January 20, 2018, the United States experienced the 18th suspension of the work of the federal government over the past five years due to a lack of funds. While the Democrats and Republicans can’t agree on a budget for 2018, the government will not work.
The situation is complicated by the fact that the Democrats demand to increase budget expenditures on measures to protect against the deportation of illegal immigrants who have entered the US as minors. In turn, the representatives of the Republican Party are categorically against it.
“I want to draw the attention of my colleagues to the statement of the White House press secretary, which says that we will not discuss the status of illegal immigrants, while Democrats take hostage by law-abiding citizens of our country with their demands. Shutdown was 100% probable Some Democrats may now be proud of themselves, but they must understand responsibility for their political games,” said Republican leader of the US Senate Mitch McConnell.
In response, the leader of the Democrats in the US Senate, Chuck Schumer, said that the only culprit for the current situation was US President Donald Trump.
“The fault should lie entirely on Trump’s shoulders.” This will be called Trump’s shutdown, because there is no one who deserves to be accused of being in this position more than President Trump.Today there will be a year as Trump heads the White House, and shutdown perfectly reflects the results of his activities.He sowed chaos in the government, and instead of rallying us, he even more divided us,” said Sumer.
Despite the loud statements and gloomy headlines of the press, the life of the Americans themselves, as the authorities promise and as history shows, shutdown will hardly be reflected. All key agencies – emergency services, police, the Justice Ministry, the post office – will continue to function as usual.
It is noteworthy that, despite the failure of negotiations on the budget and the subsequent shutdown, defense spending in the States seems to suit both Republicans and Democrats. This is a record in the history of the US $ 700 billion.
How does shutdown affect the US economy?
Through this “show” the US economy has been held many times, and each time everything ended quite happily. Although we can not fail to note the dynamics: every time shutdown is increasingly tightened in time. A record stoppage of the government’s work was recorded back in 1995, but the shutdown during Barack Obama’s second term was the second longest in history.
BACKGROUND
Under Presidents Ford and Carter, there were six partial suspension of the government’s work, which, however, affected only the Ministry of Labor and the Ministry of Health and Human Services. They lasted for 8-18 days, and the main problematic issue was the controversy over the financing of abortion.
Under Reagan, 8 total suspensions lasted from 1 to 3 days due to a budget deficit. A similar suspension for four days occurred under George HW Bush.
Under Clinton in 1995-1996. there were two complete suspensions, lasting 5 days and 21 days, caused by the discussion of budget deficit problems.
From October 1, 2013, the US government stopped working in connection with the differences between the Democrats and Republicans on budget issues. The Republicans refused to accept the draft budget proposed by the Obama administration. The shutdown lasted 16 days. The discussion on the implementation of this reform as early as 2014 or its transfer to 2015 was tied to the adoption of the country’s budget for the 2014 financial year.
Assuming that one of the worst scenarios will repeat, and the suspension of the government’s work will continue, as in 2013, how much damage will it do to the economy? In the worst case, the government will stop working on October 1.
It would not have a sudden effect on the economy, but instead it would slowly, but surely, reduce the country’s final GDP. According to Barclays estimates, shutdown usually reduces the real consumption of the federal government and gross investment by 1.5% on a quarterly basis and annual GDP by about 0.1% per week.
This is good news, because although the above diagram shows that the closure occurs with some regularity, their consequences are largely politicized, especially if the closure is short-lived. In addition, the lack of current incomes for millions of civil servants will exert pressure on Congressmen and will exert political pressure on them, pushing for a compromise. As a result, shutdown should continue for several weeks or more, in order to have significant economic consequences.
For example, according to the rating agency Standard & Poor’s, the provisional simple government in 2013 reduced GDP by at least $ 24 billion, that is, the economic growth was lower by 0.6% less than previously expected. And this is the highest estimate, other experts estimated the impact of shutdown in 2013 in 0.2% of GDP.
