Government Shutdown: More Expensive Than Staying Open

Awesome, right?

First, the government actually has to spend money in order to complete an orderly shutdown.

“When you have to shut something down, that costs money, and ramping something back up costs money,” Jeffrey Zients, deputy director of the Office of Management and Budget said Thursday.

Imagine a government construction project. Since it’s impossible to know how long the shutdown will last, workers are forced to wind down all operations and secure the work site.

That all costs money.

It’s a process that will be repeated all across the country, and in every government agency. Plus, whenever funding is restored, it will cost money to get the project back up to speed.

In the meantime, costs will increase the longer a shutdown drags on.

“The longer a shutdown is in place, the more extensive the costs become,” said John F. Cooney, a partner at law firm Venable who designed shutdown plans for the government while employed at the Office of Management and Budget.

Efficiency, We Does Not Haz It.

Alas, it gets worse:

There is also the issue of federal worker pay.

When the clock strikes midnight and a shutdown starts, paychecks for federal workers stop. But that won’t be saving taxpayers any money.

When a shutdown ends after Congress passes a spending bill, the “essential” workers who were kept on the job will automatically be paid for the time they worked during the shutdown.

And the 800,000 or so workers who might be furloughed? In every previous government shutdown, Congress has authorized back pay for them as well, even for days they didn’t work. One caveat: There is no guarantee that will happen again.

But if it does, it’ll be a double whammy. Workers will get their paychecks, but the work they normally do will have piled up in the meantime. When workers return, agencies might have to pay overtime just to catch up on all the work that wasn’t done during the shutdown.

But wait!  There’s a silver lining:

Of course, when a shutdown is considered in the context of the larger budget negotiations, the whole process will almost certainly result in savings for taxpayers. That’s because both Democrats and Republicans agree that a compromise spending bill will slash tens of billions from the federal budget.

Anyone wanna bet on this whole debacle being a net negative?

This entry was posted in Uncategorized by Jordan S. Terry. Bookmark the permalink.

About Jordan S. Terry

Founder & Managing Director, Stone Street Advisors LLC. Investment research and consulting for institutions, funds, family offices, wealthy individuals. Long/Short fundamental, value-oriented equity ideas as well as special situations (M&A, restructuring, strategic and leveraged recapitalization, pre-, in, and post bankruptcy). We like following corporate credit, particularly for special situations and short ideas.

2 thoughts on “Government Shutdown: More Expensive Than Staying Open

  1. “Anyone wanna bet on this whole debacle being a net negative?”

    Duh! Of course it will be a net negative, FINANCIALLY. What gov’t-related function isn’t?

    The important thing is the PRINCIPLE; i.e. that some sort of structural deadline will finally perhaps force the idiot career politicians to start thinking in terms of addressing REAL problems (i.e. Trillions with a “T”, not Billions with a “B”).

  2. It’s actually a great and useful piece of information. I’m satisfied that you simply shared this helpful information with us. Please stay us up to date like this. Thank you for sharing.