Kicking the economy for the heck of it

The partial (but substantial) government shutdown has been 24/7 news in the United States. One can approach the impasse from a Constitutional perspective, or discuss the role of government, or how the country should manage its budget and deficit. However, I will shift to a different focus.

The government shutdown is both an immediate and long-term hit to the already tepid economy.

An important thing to realize is that in the neoliberal age where everything is globalized and competition is more level than ever, being the only country with a federal government on time-out is a huge disadvantage. Complex economies are not divided into a purely public and a purely private sector. The Los Angeles Times reports that furloughs and paralysis are already rippling through the private sector– because plenty of private companies require public subsidies, operate out of government-owned buildings or land, or have the government as their major customer.

With regards to the high-tech industry that is so coveted and lucrative, the United States is the only research power that just stopped a lot of its research, or made future funding delayed indefinitely. As scientists explain in a AskScience reddit thread, the shutdown means that grants will be delayed, as will second and third-year funding. If you do field work that can only be done in a certain annual window, funding needs to be guaranteed well in advance. User 99trumpets states from experience that “Anybody who has submitted a proposal for a new grant should (IMHO) have a fallback plan in mind for other support for 2014” and says from the 1995 shutdown “We were in the 3rd year of a three-year NSF grant and the Year 3 funding normally would have been released in October. Even though the shutdown ended in January, we did not finally get our funds till THE FOLLOWING JULY.” After a 2012 presidential campaign that emphasized economic competition with China, having the huge portion of research that requires government funding on hold just means the new innovations and patents will come from them. And if the US gains a reputation as being unreliable, many projects may look for other nations for aid.

A while back, I discussed the important of “industrial production and capacity utilization” in judging economic health. Essentially, what portion of a nation’s economic bits are actually being used, versus standing idle? Idle tools and buildings just depreciate and become outdated, so an inefficient use of them has long term production and employment effects. Well, with this shutdown there is a lot of buildings that are shuttered, transport and tools left unused, and as the effects spread the private sector will replicate what was seen immediately with things like the National Parks. But this isn’t connected to the huge global recession that is still causing turmoil in Europe. This is an unforced error, unique to one country. Everybody else doesn’t have this handicap. Japan will not close down a portion of their office space in order to be fair.

And finally there’s the cutting in food assistance to pregnant women, and other parts of the welfare apparatus, which compounds a collapse in consumer spending. Needy people will shift more (or all) of their money towards food and rent, at the expense of everything else. Also a millionish government workers will have a similar shift.

So besides the idea of fixing the budget or restoring honor and accountability to Washington (heh), there’s the simple fact: any shutdown is an economic hit that didn’t need to happen. You can shift funding, rebalance budgets. But you can’t flip the ‘off’ switch in a bottling factory at any point. If you just do it in the middle of things, it’s going to be a disaster because everything is sensitive and the processes are complex.

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