The Commonwealth Blog

Q&A: The Government Shutdown and its Aftermath

Oct 21, 2013 @ 10:21 AM

By: Mehroz Baig

On Wednesday evening, the night of the vote in the Senate and the House that ended the government shutdown, The Commonwealth Club convened a town hall meeting to look at the past few weeks and answer questions about what the government shutdown did, what the votes in the House and Senate mean and what we can expect moving ahead. The panelists included Professor Alan Auerbach, a law professor at UC Berkeley and Dr. Tammy Frisby, a research fellow at the Hoover Institution at Stanford University. Below are some questions that our panelists addressed during the town hall. 

How did we get here? What caused this rift in Congress?

Frisby: The debt ceiling conversation has never been an easy one. During most debt ceiling increases, the majority party takes a hit for approving an increase because the popular position is to not increase the ceiling. Our current House and Senate present a new configuration: we have a Democratic president, a Democratic majority Senate and a Republican majority House, so any possibility of the Senate helping the House through the debt ceiling discussion was no longer present. Additionally, with a Republican president, it may have been easier to persuade Republicans to approve the increase, but that wasn’t the case here either. In this case, Republicans were even less incentivized to increase the debt ceiling. Ms. Frisby further noted, “We got to this point because Congress – both parties – have not done their job in passing a budget.” 

Does the debt ceiling matter?

Auerbach: “The debt ceiling makes no sense.” The government decides how much it will spend and what it will bring in through taxes. Both of these determine how much debt accumulates. So all the government has to do is pass spending and tax bills to keep the debt in check.

What are some of the consequences of the government shutdown?

Auerbach: We don’t have as secure of a position as we did before the shutdown, in terms of how the rest of the world sees us. We didn’t default this time but getting close to a default isn’t good either. Internally, our economy will slow down further. “An economy, which hasn’t been growing strongly since the recession, will grow even more slowly.” Auerbach went on to say that shutting down the government will cost us money. He noted that the furloughed workers who are returning to work will be paid retroactively, so they’re being paid for work they didn’t do; additionally, they have to manage all the backlog from the days when they couldn’t work. So not only did we have a loss in time, but also in productivity, which is an added cost.

What did the deal accomplish?

Frisby: “What the deal does not include are any substantial changes to the Affordable Care Act.” And that’s the reason why this started in the first place. The Republicans managed to stay at sequestered funding until Jan. 15, 2014. And “they added some legislative language that says that we need to have stricter income verification requirements for people receiving subsidies under the Affordable Care Act.”

Auerbach: There are long-term budget problems that we face that this discussion or the shutdown didn’t address. Our large underlying problem is that our taxes can’t pay for the benefits we’ve promised.

What happens next?

Frisby: The government is now reopened and they have funding until Jan. 15, 2014. The debt ceiling has been raised until February 7, 2014. So the debt ceiling discussion will happen again next year, when 2014 primaries will be in swing. This will become an election issue and voters will get to decide if they tolerate this. In the next election cycle, we’ll also see a real test for moderate, business-oriented Republicans: can they serve as a counterweight to the Tea Party/far-right GOP? We will also need to see how John Boehner feels after all this: if he feels burned by the Tea Party and the far-right GOP, he may be more inclined to produce more bipartisan results.