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The cost of keeping the government's lights off

As the standoff in Congress continues over where and what to cut from federal spending for the rest of this fiscal year, the prospects for a government shutdown loom larger. 

But the haggling over the budget could have a very expensive consequence:  A shutdown costs the government money.

A lot of it.

The Office of Management and Budget estimated early in 1996 that the first of two government shutdowns – for six days in November 1995 – cost taxpayers an estimated $100 million per day. The final price tag for that closing and the record three-week shutdown later that year - including back pay to workers who did not go to work over that time: Over $1.25 billion.

Other shutdowns have been costly too. According to the Government Accountability Office, a funding gap of just three days in 1991 rang up a $607 million bill, including $363 million in lost revenue and fees.  

If Congress fails to reach an agreement on a stopgap spending measure before the current funding law expires on March 4, the federal government could be headed for the 16th closure since Jimmy Carter’s presidency.

The costs of shutdown
The executive branch of the federal government currently employs just over two million civilians – about the same number as it did in the mid-1990s – and requires hundreds of millions of dollars per day to function.

But why does it cost so much to keep the lights off?

First of all, pay.

The Office of Management and Budget requires federal agencies to maintain a contingency plan in case of  a “funding hiatus” – including information about how many employee are essential for “military, law enforcement, or direct provision of health care activities” or otherwise “to protect life and property.” That would include air traffic controllers, national security professionals, key medical workers, and law enforcers, among others. But, in the event of a shutdown, “non-essential” employees would be forced to stay home until the impasse gets resolved.

In the 1990s, the 800,000 employees who were furloughed in November and the 260,000 who sat idle in December received a total of about $1 billion in back pay even though they could not report to work, according to a report by the Office of Management and Budget.

(That was a relief to many employees, who were uncertain for weeks about whether or not they would ultimately be paid. Robert Tobias, who served as the president of the National Treasury Employees Union during the shutdown and now teaches at American University, said that his organization and other federal employee groups dispersed tens of thousands of dollars in loans to workers who were unable to pay their bills without receiving their paychecks on time.) 

There’s also the issue of uncollected fines, fees, and other revenues.

The Environmental Protection Agency, for example, failed to collect $63 million in fines because of cancelled facility inspections during the November shutdown in 1995. Uncollected airline taxes and fees by users of government facilities like national parks also added up.

There are also major potential trickle-down effects for the nation’s economy.

Shortly after the three-week shutdown in 1995, the Interior Department concluded that the shuttering of national parks had cost related businesses and nearby local governments almost $300 million. A study conducted by the by National Parks and Conservation Association found that – even a year after the budget standoff – small businesses were still suffering from a lingering decline in tourism, especially by foreign visitors.

Contractors also suffered during the mid-1990s shutdowns. According to a survey conducted at the time by Signet Banking Corp., a third of federal contractors furloughed some of their own employees in January 1996. Many of those workers never received checks from their private-sector employers to make up for time lost.

Looming threat
It remains unclear whether or not a shutdown will occur, and the Obama administration has been mostly muted in its warnings about the economic effects of a potential budget stalemate after March 4.

"We don't want to do things that would jeopardize confidence in the (economic) recovery,” said Treasury Secretary Timothy Geithner at a  breakfast sponsored by Bloomberg News on Wednesday. But he declined to comment further on the possible impact of a shutdown, saying of the congressional negotiators working on a stopgap bill, “I don’t want to complicate their challenge.”

Still, the potential political and commercial costs of the 1995-96 standoff are on the minds of the shutdown’s veterans and its students.

“What Republicans discovered was that, while people don’t pay much attention to the federal government, they notice a great deal when the services they need are not available,” said Tobias. “That’s why there was a huge backlash.”