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<blockquote data-quote="Bugsy Malone" data-source="post: 9006" data-attributes="member: 201"><p><strong>4. <u>The US Government Shutdown (Angel) </u></strong></p><p></p><p><strong><u>The Story </u></strong></p><p></p><p>The US federal government went into a partial shutdown on the midnight of 22nd December 2018 until January 25 2019, when Congress and Mr Trump could not agree on a budget. Lasting for 35 days in total, it was the longest US government shutdown in history and the second federal government shutdown since Mr Trump became president.</p><p></p><p>It is deemed partial because essential services, such as Medicare, mail delivery, tax collection and military, continued to operate while non-essential departments, such as national park rangers and NASA employees were furloughed (ˈfəːləʊ; a temporary leave of employees due to some special circumstances including current political or economic conditions).</p><p></p><p><strong>Background: </strong></p><p></p><p>Understanding how the normal budget process works in the US will help to better understand how the situation got to where it is now. In the briefest form, this process can be simplified into 4 steps.</p><p></p><p><strong>Step 1:</strong> Congress (the US legislative/ lawmakers) appropriates funds by September 30 for the following fiscal year.</p><ul> <li data-xf-list-type="ul">A recap: at the beginning of each year, the US Office of Management and Budget submits the president’s proposed budget, which will be reviewed for authorisation.</li> <li data-xf-list-type="ul">Without the Congress’s approval/ enactments, federal money cannot be spent and agencies cannot function.</li> <li data-xf-list-type="ul">To avoid a halt to the government’s operation:</li> </ul><p><strong>Step 2:</strong> Congress will enact a continuing funding resolution (“CR”)</p><ul> <li data-xf-list-type="ul">A CR is a temporary funding measure that Congress can use to fund the federal government for a limited amount of time</li> <li data-xf-list-type="ul">It is usually used to avoid a government shutdown and to give lawmakers more time to enact the necessary appropriate bills to fund the federal government for the following fiscal year</li> <li data-xf-list-type="ul">Upon expiration of the designated timeframe, a solution will be needed.</li> <li data-xf-list-type="ul">If Congress still cannot agree on this:</li> </ul><p><strong>Step 3:</strong> Government shuts down</p><ul> <li data-xf-list-type="ul">This signals a complete breakdown in the budget process</li> </ul><p><strong>Step 4:</strong> Getting out of the shutdown</p><ul> <li data-xf-list-type="ul">To end the shutdown, an agreement supported by the Democrats and signed by Mr Trump as POTUS is required.</li> </ul><p><strong>Current situation</strong></p><ul> <li data-xf-list-type="ul">The agreement to end the shutdown was obtained and Mr Trump signs to a three-week CR to renegotiate plans for increased border security</li> <li data-xf-list-type="ul">Republican-controlled Senate submitted a budget that contains wall funding, but Democrats mostly refused to budge.</li> <li data-xf-list-type="ul">Mr Trump hinted on Twitter that he’s willing to negotiate but with an ultimatum for any deal to include full funding for his $5.7 billion project.</li> <li data-xf-list-type="ul">At the time of writing (1st Feb 2019), Mr Trump expressed that he will declare a national emergency if Congress is unable to strike a deal to his liking by the end of three weeks.</li> <li data-xf-list-type="ul">If this happens,</li> </ul><p><strong>Looking beyond headlines (personal views may be implied):</strong></p><p></p><p>The shutdown is really just a direct retaliation to Congress for not giving in to Mr Trump’s demands. If you’re wondering why Mr Trump is so insistent on the US-Mexico border, recall that this project is a cornerstone of his election campaign. Even though America is not in turmoil and unemployment is as low as it has ever been, the project is a key piece of Mr Trump’s immigration policy.</p><p></p><p>On the other side, Democrats fiercely opposed to this as they believe that $5.7bil would be better spent on other border security measures, such as advanced technology instead of a wall. To a large extent, that is correct. It is likely that more people fly into the country legally and overstay their visas. If immigration really is a problem that Mr Trump wants to tackle, it would make more sense to look into those directions. However, $5.7 billion is also nothing compared to the trillions spent in a year.</p><p></p><p>Thus, perhaps The Economist’s view is correct. The political fight is really just about Mr Trump’s authority. Having picked a fight, he must win it (regardless of what it takes) or risk seeing his powers diminished for the rest of the term.</p><p></p><p><strong><u>Impact on businesses and law firms: </u></strong></p><p></p><p>The analysis of the effects of the shutdown will be divided into three different sectors. Where current furlough data is not yet available, a comparison will be made to the 2013 shutdown to provide an idea of the likely effects. For an in-depth analysis of the detrimental effects of a government shutdown, see <a href="https://www.pgpf.org/analysis/the-cost-of-crisis-driven-fiscal-policy" target="_blank">https://www.pgpf.org/analysis/the-cost-of-crisis-driven-fiscal-policy</a>.</p><p></p><p><strong>a. Commerce:</strong></p><ul> <li data-xf-list-type="ul">Without a clear budget for the year ahead, government agencies cannot plan appropriately to match their resources for their responsibilities. This <u>creates commercial uncertainties</u> in the economy. Careful business actors will need to be armed with contingency plans in case of unexpected changes in the government’s fiscal policies or regulations.</li> <li data-xf-list-type="ul"><u>Business operations are severely affected</u>. Standard and Poor’s analysis reported that the shutdown had reduced economic activity by as much as $6.5 billion per week.</li> <li data-xf-list-type="ul">In the <u>2013 shutdown</u>: technology exports were delayed.</li> </ul><p><strong>b. Economy</strong></p><ul> <li data-xf-list-type="ul">Increase in the rate of unemployment</li> <li data-xf-list-type="ul">Lower economic growth</li> <li data-xf-list-type="ul">Higher borrowing costs for business</li> <li data-xf-list-type="ul">The Congressional Budget Office reports that shutdown had cost the economy $11 billion as a whole. Although, understand that the true costs are likely to be higher because the CBO cannot estimate the impact on businesses who cannot get federal permits or loans in time.</li> </ul><p><strong>c. Government Operation</strong></p><ul> <li data-xf-list-type="ul"><u>Diverted attention increases inefficiency</u><ul> <li data-xf-list-type="ul">Without a full-year funding’s bill, lawmakers will be dependent on CRs to fund the government on a short-term basis. This takes up time and resources that could have been better spent on other important legislative duties for government agencies to operate more efficiently.</li> </ul></li> <li data-xf-list-type="ul"><u>A comparison to what happened to other departments in the 2013 shutdown:</u><ul> <li data-xf-list-type="ul"><strong>Labor:</strong> Hundreds of thousands of government workers have been furloughed without knowing when they will return to work or be paid.</li> <li data-xf-list-type="ul"><strong>Treasury:</strong> export certificates for important trade (like alcohol) were not issued, tax refunds were delayed and implementation of financial sanctions against countries like Iran and Syria were hampered</li> <li data-xf-list-type="ul"><strong>Energy:</strong> the government agencies’ labs, plants and nuclear clean- up sites lost weeks of productivity</li> <li data-xf-list-type="ul"><strong>Housing and Urban Development:</strong> loans to develop or rehabilitate rental units were unprocessed</li> <li data-xf-list-type="ul"><strong>Environment & Healthcare:</strong> inspections of hazardous waste and chemical sites, reviews of adverse health effects of industrial chemicals and food safety inspections were delayed or halted</li> </ul></li> </ul><p><u>Final thoughts - what can happen from here:</u></p><p></p><p>To conclude, government shutdowns are costly and bad for the economy. Ideally, the lawmakers should work together to create a long-term plan to address the growing mismatch between spending and revenue. Should they fail to do so, another CR will be enacted, diverting valuable resources.</p><p></p><p>Other unfavourable outcomes would be to go through another shutdown, if the lawmakers fail to agree on a complete budget for the rest of the fiscal year 2019 by the time the current CR expires, or have a national emergency declared. In the latter case, Mr Trump will be able to spend money on the wall as ‘military construction’ even as he reopens the government. Constitutional lawyers would be keen to examine the limits and extent of Mr Trump’s presidential authority.</p><p></p><p><u>Bonus fun facts: The Wall in Figures</u></p><ul> <li data-xf-list-type="ul">The US-Mexico border is 2000 miles.<ul> <li data-xf-list-type="ul">A third of this length is already fenced/ walled which reduced immigration by 83,000.</li> </ul></li> <li data-xf-list-type="ul">Building a wall for the rest of the border:<ul> <li data-xf-list-type="ul">would stop 144,000 immigrants</li> <li data-xf-list-type="ul">raise incomes of low-skilled workers by $0.58 cents a year but cost $15 per American</li> </ul></li> <li data-xf-list-type="ul">The verdict: A Wall is not necessarily good for the overall economy because the ‘pros’ simply do not outweigh the cons.</li> </ul><p>(source: <a href="https://www.thebalance.com/government-shutdown-3305683" target="_blank">https://www.thebalance.com/government-shutdown-3305683</a>)</p><p></p><p><em>What do you think will happen once the 3 weeks expire? Do you agree that the fight is really just about Mr. Trump’s authority? Thinking in conjunction with the current Brexit situation, will international businesses lose confidence with the stability in Western politics?</em></p></blockquote><p></p>
[QUOTE="Bugsy Malone, post: 9006, member: 201"] [B]4. [U]The US Government Shutdown (Angel) [/U][/B] [B][U]The Story [/U][/B] The US federal government went into a partial shutdown on the midnight of 22nd December 2018 until January 25 2019, when Congress and Mr Trump could not agree on a budget. Lasting for 35 days in total, it was the longest US government shutdown in history and the second federal government shutdown since Mr Trump became president. It is deemed partial because essential services, such as Medicare, mail delivery, tax collection and military, continued to operate while non-essential departments, such as national park rangers and NASA employees were furloughed (ˈfəːləʊ; a temporary leave of employees due to some special circumstances including current political or economic conditions). [B]Background: [/B] Understanding how the normal budget process works in the US will help to better understand how the situation got to where it is now. In the briefest form, this process can be simplified into 4 steps. [B]Step 1:[/B] Congress (the US legislative/ lawmakers) appropriates funds by September 30 for the following fiscal year. [LIST] [*]A recap: at the beginning of each year, the US Office of Management and Budget submits the president’s proposed budget, which will be reviewed for authorisation. [*]Without the Congress’s approval/ enactments, federal money cannot be spent and agencies cannot function. [*]To avoid a halt to the government’s operation: [/LIST] [B]Step 2:[/B] Congress will enact a continuing funding resolution (“CR”) [LIST] [*]A CR is a temporary funding measure that Congress can use to fund the federal government for a limited amount of time [*]It is usually used to avoid a government shutdown and to give lawmakers more time to enact the necessary appropriate bills to fund the federal government for the following fiscal year [*]Upon expiration of the designated timeframe, a solution will be needed. [*]If Congress still cannot agree on this: [/LIST] [B]Step 3:[/B] Government shuts down [LIST] [*]This signals a complete breakdown in the budget process [/LIST] [B]Step 4:[/B] Getting out of the shutdown [LIST] [*]To end the shutdown, an agreement supported by the Democrats and signed by Mr Trump as POTUS is required. [/LIST] [B]Current situation[/B] [LIST] [*]The agreement to end the shutdown was obtained and Mr Trump signs to a three-week CR to renegotiate plans for increased border security [*]Republican-controlled Senate submitted a budget that contains wall funding, but Democrats mostly refused to budge. [*]Mr Trump hinted on Twitter that he’s willing to negotiate but with an ultimatum for any deal to include full funding for his $5.7 billion project. [*]At the time of writing (1st Feb 2019), Mr Trump expressed that he will declare a national emergency if Congress is unable to strike a deal to his liking by the end of three weeks. [*]If this happens, [/LIST] [B]Looking beyond headlines (personal views may be implied):[/B] The shutdown is really just a direct retaliation to Congress for not giving in to Mr Trump’s demands. If you’re wondering why Mr Trump is so insistent on the US-Mexico border, recall that this project is a cornerstone of his election campaign. Even though America is not in turmoil and unemployment is as low as it has ever been, the project is a key piece of Mr Trump’s immigration policy. On the other side, Democrats fiercely opposed to this as they believe that $5.7bil would be better spent on other border security measures, such as advanced technology instead of a wall. To a large extent, that is correct. It is likely that more people fly into the country legally and overstay their visas. If immigration really is a problem that Mr Trump wants to tackle, it would make more sense to look into those directions. However, $5.7 billion is also nothing compared to the trillions spent in a year. Thus, perhaps The Economist’s view is correct. The political fight is really just about Mr Trump’s authority. Having picked a fight, he must win it (regardless of what it takes) or risk seeing his powers diminished for the rest of the term. [B][U]Impact on businesses and law firms: [/U][/B] The analysis of the effects of the shutdown will be divided into three different sectors. Where current furlough data is not yet available, a comparison will be made to the 2013 shutdown to provide an idea of the likely effects. For an in-depth analysis of the detrimental effects of a government shutdown, see [URL]https://www.pgpf.org/analysis/the-cost-of-crisis-driven-fiscal-policy[/URL]. [B]a. Commerce:[/B] [LIST] [*]Without a clear budget for the year ahead, government agencies cannot plan appropriately to match their resources for their responsibilities. This [U]creates commercial uncertainties[/U] in the economy. Careful business actors will need to be armed with contingency plans in case of unexpected changes in the government’s fiscal policies or regulations. [*][U]Business operations are severely affected[/U]. Standard and Poor’s analysis reported that the shutdown had reduced economic activity by as much as $6.5 billion per week. [*]In the [U]2013 shutdown[/U]: technology exports were delayed. [/LIST] [B]b. Economy[/B] [LIST] [*]Increase in the rate of unemployment [*]Lower economic growth [*]Higher borrowing costs for business [*]The Congressional Budget Office reports that shutdown had cost the economy $11 billion as a whole. Although, understand that the true costs are likely to be higher because the CBO cannot estimate the impact on businesses who cannot get federal permits or loans in time. [/LIST] [B]c. Government Operation[/B] [LIST] [*][U]Diverted attention increases inefficiency[/U] [LIST] [*]Without a full-year funding’s bill, lawmakers will be dependent on CRs to fund the government on a short-term basis. This takes up time and resources that could have been better spent on other important legislative duties for government agencies to operate more efficiently. [/LIST] [*][U]A comparison to what happened to other departments in the 2013 shutdown:[/U] [LIST] [*][B]Labor:[/B] Hundreds of thousands of government workers have been furloughed without knowing when they will return to work or be paid. [*][B]Treasury:[/B] export certificates for important trade (like alcohol) were not issued, tax refunds were delayed and implementation of financial sanctions against countries like Iran and Syria were hampered [*][B]Energy:[/B] the government agencies’ labs, plants and nuclear clean- up sites lost weeks of productivity [*][B]Housing and Urban Development:[/B] loans to develop or rehabilitate rental units were unprocessed [*][B]Environment & Healthcare:[/B] inspections of hazardous waste and chemical sites, reviews of adverse health effects of industrial chemicals and food safety inspections were delayed or halted [/LIST] [/LIST] [U]Final thoughts - what can happen from here:[/U] To conclude, government shutdowns are costly and bad for the economy. Ideally, the lawmakers should work together to create a long-term plan to address the growing mismatch between spending and revenue. Should they fail to do so, another CR will be enacted, diverting valuable resources. Other unfavourable outcomes would be to go through another shutdown, if the lawmakers fail to agree on a complete budget for the rest of the fiscal year 2019 by the time the current CR expires, or have a national emergency declared. In the latter case, Mr Trump will be able to spend money on the wall as ‘military construction’ even as he reopens the government. Constitutional lawyers would be keen to examine the limits and extent of Mr Trump’s presidential authority. [U]Bonus fun facts: The Wall in Figures[/U] [LIST] [*]The US-Mexico border is 2000 miles. [LIST] [*]A third of this length is already fenced/ walled which reduced immigration by 83,000. [/LIST] [*]Building a wall for the rest of the border: [LIST] [*]would stop 144,000 immigrants [*]raise incomes of low-skilled workers by $0.58 cents a year but cost $15 per American [/LIST] [*]The verdict: A Wall is not necessarily good for the overall economy because the ‘pros’ simply do not outweigh the cons. [/LIST] (source: [URL]https://www.thebalance.com/government-shutdown-3305683[/URL]) [I]What do you think will happen once the 3 weeks expire? Do you agree that the fight is really just about Mr. Trump’s authority? Thinking in conjunction with the current Brexit situation, will international businesses lose confidence with the stability in Western politics?[/I] [/QUOTE]
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