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Minnesota 2020 Journal: Gov’t Shutdown is a Wrecking Ball

September 27, 2013 By John R. Van Hecke, Executive Director & Fellow

A government shutdown is a bad idea. Let me repeat. A government shutdown—federal, state, township; any level—is a bad idea. It’s bad for business, bad for the economy, bad for families, bad for public confidence, bad for Minnesota, bad for workers, and bad for you and me. So, what are conservative public policy leaders going to let extremists in their caucuses do next week?

They’ll allow the tea party to bring us to the brink at best and shut down the federal government at worst.

The idea seems pointless and even absurd. Its equivalent of repairing loose car trim by driving the car off a cliff, hoping that the fall snaps the trim back into place. Minnesota’s 2011 state government shutdown can—should—inform the federal stand-off. It didn’t end well for the conservative state legislative leadership; they lost control of both chambers in the next election.

One or two day shutdowns, still poor practice, are quickly forgotten. Multiple week shutdowns, on the other hand, carry long term costs, consequences and recriminations. I’d forgotten or perhaps had never realized that the national government experienced a series of short one, two or several day shutdowns from the mid-1970s to the first Gringrich shutdown of 1995. The second Gingrich shutdown lasted for 21 days, from late 1995 to early 1996. We haven’t had a national government shutdown since, suggesting that the experience checked shutdown as a policy tactic.

But, things have changed since 1995. Very few congressional members' service predates the last national government shutdown. Less than 20% were in their current office. Four of every five House Members and Senators were elected after 1995. Lacking direct experience with consequences leads to easy infatuation with a shutdown strategy.

Here’s a quick recap of the Minnesota 2011 state government shutdown. Conservatives led both state legislative chambers for the first time in 38 years while newly elected Governor Mark Dayton pressed a campaign promise to raise taxes on Minnesota’s very highest income earners. He hoped to bring the tax burden on the highest earners more closely into line with the total tax burden borne, as a percentage of income, by low and middle income Minnesota families. Conservatives opposed this change.

Conservative policy leaders labored to preserve tax code changes, championed and passed by Governor Tim Pawlenty, easing wealthy Minnesotans’ tax obligations. There was some other stuff but, candidly, it was a tax and budget fight. Minnesota faced a projected $5 billion budget shortfall. Since Minnesota can’t print money, state leaders contemplated three basic budget balancing solutions: 1) raise taxes, 2) cut budget or 3) a combination of the first two. In nearly every previous budget fight, the answer was always door number three. Not in 2011.

State House and State Senate majority caucus leaders hung tough, going eye-ball to eye-ball with Dayton. Relishing the prospect of shutting down a government that they saw as the source of Minnesota’s woes, conservative leaders, created a cuts-only state budget, slashing social services and infrastructure spending. Dayton vetoed nearly all of the spending bills. On July 1, without authorized appropriations, all non-essential government functions stopped.

After two weeks, Dayton and legislative leaders resumed negotiating. A week later, they had a deal. It wasn’t pretty and it disappointed almost everyone but it was a deal. Government resumed operations on July 21. About a year and four months later, Minnesota voters weighed in, choosing new state elected officials that restructured legislative leadership. There hasn’t been any talk of state shutdown since.

Minnesota is a net federal payer state. We generate more per-capita revenue for federal coffers than the federal government spends on us. Minnesota has no major military facilities or federal cash-flow heavy facilities, limiting federal spending. It also means that a shutdown’s immediate, direct effects will be less severe here than will be the case in other states.

The best understanding of a federal government shutdown’s impact is found in the on-going effects of the 2013 federal budget sequestration. The sequester is an automatic budget reduction mechanism. It’s a fiscal austerity policy that seeks to reduce federal budget outlays by uniformly reducing federal spending authority and compelling cuts within federal agencies without specific Congressional policy direction. If the sequester is a ball-peen hammer, a shutdown will be a wrecking ball.

Further, despite wide-spread anticipation that the US Federal Reserve Board would alter its quantitative easing policy, permitting interest rates to rise, the recent Fed Board of Governors meeting produced no change. In part, the Fed believes that Congress is determined to shut down the government thus the Fed delayed its own monetary policy change. And, we’re all feeling the consequences.

Hard-core policy ideologues don’t fare well in history. Leaders supporting policy that improve schools, increase affordable healthcare access, create transportation infrastructure and facilitate economic expansion and wide-spread wealth accrual are remembered fondly. Build the house; don’t burn it down. It’s a powerful lesson that should guide shutdown advocates away from the cliff.

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