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During the government shutdown, essential services/employees are exempt, and the government continues to pay for those services/employees. Some people might be hoping that the government shutdown might allow government to save money and not hit the impending debt ceiling.

If the government continues the shutdown indefinitely with no appropriation bills passing, will the government continue to increase its debt or will its budget be balanced? (Note: Assume current revenues/receipts and essential outlays, i.e. those services/expenses not affected by the government shutdown.)

NOTE: indefinitely means that: (1) There's no cost to restart the shut-down program and (2) furloughed employees do NOT need to be paid retroactively for not working since that only happens (if at all) once the shutdown ends.

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    The government shutdown costs money. – Avi Oct 2 '13 at 21:43
  • Wow, this must be a new low, even for this site. Three answers, all with negative votes. – DJClayworth Oct 3 '13 at 17:30
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    The edit makes this a stupid question. If the shutdown continues indefinitely then government ceases to function, and we can all give up. – DJClayworth Oct 3 '13 at 17:33
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    in·def·i·nite·ly: adverb 1. for an unlimited or unspecified period of time. "talks cannot go on indefinitely" – user1530 Oct 4 '13 at 2:08
  • you might be interested to know that most of the money that the government spends(military, social security, medicare) is still being spent during the shutdown. – Sam I am Oct 15 '13 at 16:00
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No it won't eliminate the deficit.

There are a number of reasons for this. The most important is that while the furloughed employees are not paid during the shutdown, they will be paid retroactively when then shutdown is over. There will be no net savings.

Secondly most of the IRS is deemed non-essential. While the IRS will continue processing automated payments, it will cease most of its work. While they will continue to process money sent to them, they will be unable to either demand or enforce payments, or do routine processing of most tax returns.

But the department’s largest component, the Internal Revenue Service, will cease some of its key functions such as audits, examinations of returns, processing of paper returns and call-center operations for taxpayers with questions.

Therefore while the shutdown is in effect there is a huge reduction in government income, and thus no opportunity for paying down then debt. Technically people are supposed to keep paying their taxes, and probably will if they think the shutdown will end sometime soon. If they think the shutdown is long term, probably not.

While the country can survive without non-essential services for am while, it can't do so indefinitely. Without services like visa processing the US economy would eventually grind to a halt. There are also losses in income during the shutdown that will never be recovered. Visitors to national parks who were denied entry because of then shutdown are not going to pay their access fees retrospectively when the shutdown ends. However social security allowances that were delayed will eventually have to be paid. It's also virtually certain that restarting of some programs after the shutdown will require overtime from the people responsible for them.

An 'indefinite' shutdown does of course completely screw everybody. Education isn't funded. Food isn't inspected. Business loans aren't guaranteed. Tax refunds don't happen. Defense contracts don't get approved. Of course we all know that isn't going to happen, but it was the question.

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    I guess you didn't read the question, (if the government continues the shutdown indefinitely), but even still retro-active back pay isn't a certainty. Thanks for trying though. – user1873 Oct 3 '13 at 15:18
  • As for the cost of shutting down parks, it seems that sometimes they like to spend more money keeping them closed and setting up more guards than when they were open to the public. (There is also a nice picture out there showing a sign on an information booth during a long ago government shutdown, but people walking around in the open monument.) – user1873 Oct 3 '13 at 15:22
  • @user1873 I tweaked your question title a bit to emphasize the 'indefinite' part. I don't know if that's a great question, though, as it's hypothetical. – user1530 Oct 3 '13 at 16:24
  • IRS doesn't produce "government income". Taxpayers do. IRS just harasses people so the income gets delivered more reliably. – user4012 Oct 3 '13 at 16:26
  • "Without services like visa processing the US economy would eventually grind to a halt." - tell that to every Slashdot commenter screaming "Bill Gateses are selling out the country to outsource our jobs" everytime the visa topic is raised on /. (frankly, I think the truth is that both you and them are wrong re: visas). – user4012 Oct 3 '13 at 16:27
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Yes, eliminating discretionary spending would eliminate the deficit.

The Congressional Budget Office's Baseline Budget projections (Table 1, pg. 11 in pdf) show a deficit less than the total of all discretionary spending for the last year they have actual numbers for, (2012) and projections for subsequent years. (Here is also a pretty graph for 2011)

      Actual,
         2012| 2013| 2014| 2015| 2016| 2017| 2018| 2019| 2020|...
Revenues
       Total |2,450|2,813|3,042|3,399|3,606|3,779|3,943|4,103|4,280|...

Outlays
Discretionary|1,285|1,213|1,168|1,187|1,206|1,229|1,250|1,286|1,316|...
       Total |3,537|3,455|3,602|3,777|4,038|4,261|4,485|4,752|5,012|...

Deficit(-)..|-1,087| -642| -560| -378| -432| -482| -542| -648| -733|

Even if we assume that the government loses money at the same rate as during the 1995 and 1996 government shutdowns (CBO estimate), or $2 billion during the 27 day period in 2013 inflation adjusted dollars, that only comes to approximately $27 billion (= $2 billion * (365 days/27 days)). Taking that difference into account, and even possible reductions in economic activity (mentioned in Avi's answer), do not exceed projected discretionary spending in coming federal budget years.

Note: The military continues to be paid in the most recent shutdown, because of the Pay Our Military Act. Military expenditures are a large portion of discretionary spending (about $600 billion), so if you exclude that spending from the shutdown, you are much closer to exceeding revenue.

  • Do you think I need a source (OMB / CBO) that indicates the difference between mandatory and discretionary spending, and how one is exempted during a government shutdown and the other is not? (Or is that obvious?) – user1873 Oct 3 '13 at 14:07
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    There are lots of flaws in this analysis. The main one is to assume that 'discretionary spending' payments will not have to be paid out anyway once the shutdown is over. – DJClayworth Oct 3 '13 at 15:07
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    @DJClayworth, it appears that your and my analysis need to account for what percentage of furloughed nonessential employees perform some work during the shutdown. If we assume that the shutdown lasts indefinately, I don't believe any payments can be made to nonessential employees, and this link and the link in the comments in your answer indicate, retroactive bck pay is not guaranteed. – user1873 Oct 3 '13 at 16:14
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    I hope it's obvious to everyone that if the shutdown continues indefinitely, then the entire economy is completely screwed. – DJClayworth Oct 3 '13 at 17:31
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    @DVK: And those who aren't will of course pay for the national infrastructure. – Martin Schröder Oct 5 '13 at 20:06

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