The Government Shutdown and its Cost

So the numbers are now out from the CBO about the cost of the longest government shutdown in US history. The five week shutdown cost us $11 billion, of which it is expected that $8 billion will be recovered, but $3 billion will be permanently lost. So the question that should be on the minds of everyone is, has this been worth it?

Economic growth and stability have been linked to the presence of strong political and economic institutions, perhaps more importantly are the former because they tend to shape the latter. Democratic political institutions seek to create a delicate but necessary balance between a strong center and meaningful participation by the rest of the polity in determining policy outcomes. The strong center itself is designed in ways that seek to ensure a balance among competing powers and avoid a descent into dictatorship.

One of the drawbacks of such very strong institutional design is the possibility that we end up with political gridlock. This was the situation with the government shutdown that just played out in which President Trump had insisted on getting $5.7 billion approved for a border wall or steel barrier along the US southern border from Congress or he would not sign any bill passed by Congress that allocated funding to enable government agencies continue to operate. So initially with the Senate not having enough votes to pass a bill with the border funding included, and later, with a divided government in place (the House being majority controlled by the Democrats), the political gridlock continued as the Senate continued to ignore the bills passed by the House to open the government without the funding for the border wall.

Of course the shutdown has now ended, temporarily, as President Trump appeared to have backed down given mounting pressure from the impacts of the shutdown. Two things are worth noting in all of this:

First, the unnecessary hardship imposed on federal workers over this period due to political feuding between the two parties. Some of these workers had to lean on food banks, charitable donations and fund raisers to make ends meet. Some had to reach humbling agreements with landlords and creditors to delay payments while they were furloughed. Others, not necessarily federal workers, including contractors having business to do with the government, and those who would have utilized some of the government or public services also experienced inconveniences associated with having these activities delayed or even cancelled.

Second, there is that permanent $3 billion loss. To put that in context, what can that amount do?

Well for one thing looking at two major government agencies - the Corps of Engineers and the EPA, their estimated budgets for 2018 are $6 billion and $8 billion respectively. The loss from the shutdown is approximately half of either of these major agency's yearly budget. If we look at the 2018 appropriation for Higher Education spending (not including loans) within the Education Department budget, the amount is $2.48 billion. So we are looking at a nontrivial amount of money that has just vanished into thin air with nothing particularly achieved. Worse, the reopening of the government is "temporary", as another shutdown is being threatened if negotiations do not ultimately produce the $5.8 border wall funding by February 15.

When our institutions seem to encourage such hostage taking or perpetual gridlock, is some form of change in the rules of the game not due? or is this a small price to pay for long run political stability and the generation of public debates that lead to better policy outcomes?