It seems we’ve stood and talked like this before… The federal government approaches the beginning of the next fiscal year, and the shutdown crisis starts as if by clockwork. But this time, something is different. This time, the Congress has passed no appropriations bills at all. Usually, at least the Pentagon and the Congress itself have been funded.
It brings back such memories. In 1995 and 1996, the Congress (led by then-Senator Bob Dole (R-KN) and then-Representative Newt Gingrich (R-GA)) could not agree on appropriations (and a lot of other things) with then-President Bill Clinton (D). The Congress did manage to pass the easy bills that year. They funded themselves. They funded the Pentagon. They funded the Departments of Agriculture and Energy, and their transportation and water projects. They also funded the Treasury (convenient, because by the time the drama had ended, the Treasury had had an enormous amount of work to do). But the rest of the government – the Departments of Commerce, Justice, State, Interior, Labor, Health and Human Services, Housing and Urban Development, and Veterans Affairs, and the District of Columbia – went into the fiscal year without appropriations.
All of those agencies were shut down for five business days in November, and then again for 21 business days from December into January – this second episode, considering weekends and holidays, lasting for more than a calendar month.
The standout practical lessons from that time are pertinent today. For one thing, there is statute and legal opinion regarding what an agency can and cannot do when unfunded. You have heard about “essential” personnel. The law does not use that term in this connection. Rather, it states that employees may not report for work (no volunteers, no good Samaritans, no workaholics) unless their work is pertinent to “emergencies involving the safety of human life or protection of property,” in which case they are “excepted” from the general ban. These excepted employees are perhaps the major category who would report for work even in the absence of appropriations.
If you have been walking lately anywhere between left and right, you surely have heard the salvos about the number of new part-time jobs flying constantly over your head. One side believes that the recent limited increase in employment has been overwhelmingly concentrated in part-time jobs, surely because employers are trying to circumvent the coverage mandate in the Patient Protection and Affordable Care Act (known for short as the ACA, or sometimes as “Obamacare”). The other side believes that the recent moderate job growth has followed generally the historical division between full- and part-time work, adjusting for the economy’s current position in an arc of recovery from the extraordinarily deep economic downturn following on the financial crisis – and that the ACA has had absolutely no influence.
My own conclusion is that both extremes are trying too early to answer the wrong questions on the basis of tortured data. About the most I would feel confident in saying at this time is that employment in general, and full-time employment in particular, still suffer from the after-effects of the historically severe recession, but that current healthcare policy will not help its future recovery – which is why six years ago CED proposed fundamental changes in our nation’s health insurance system that would have been very different from the law that was enacted in 2010.
Background: Under the ACA, firms with at least 50 full-time employees, where “full-time” is defined as working at least 30 hours per week, must provide coverage to all of their full-time workers, or pay a penalty. This is the “employer mandate” much discussed in the ether. Thus, firms on the size borderline might reduce their full-time employee count below 50 by cutting current workers’ hours to below 30 and thereby avoid the coverage mandate entirely; and larger firms might avoid covering particular workers by cutting their weekly hours (or by hiring new workers at fewer than 30 hours per week). As you know, the effective date of the employer mandate has been postponed from 2014 to 2015.
In recent weeks and months, several pundits have argued from the Bureau of Labor Statistics’ data that an enormous share of employment growth in the current recovery has arisen from part-time jobs. One story claimed that there were either 35 or 110 new part-time jobs for every new full-time job created over the last six months. Another put the figure at 4.3 part-time jobs per full-time job in the first six months of this year. A third said that 96 percent of new jobs this year were part-time – so a ratio of about 24 to one. All assigned this mass movement toward part-time jobs to employer behavior under the impending mandate of the ACA.
With 144.5 million persons employed in August of 2013 (from the not-seasonally adjusted data), and only 25.4 million – 17.6 percent – of those persons working part-time, such extreme ratios of part-time job creation might seem unlikely, though not impossible. Here are some factual points to help you to decipher this dialog:
Fanciful rumors of a deal between President Barack Obama and House Speaker John Boehner (R-OH), trading support for military action in Syria for budget concessions, were blown well and truly out of the water this week. Right now, there is no serious prospect of a budget agreement of any kind, as a House bill that would at least have postponed an appropriations standoff has been withdrawn from the calendar.
First, a brief word on the Syrian connection, which has gone away for the moment but could return as a rumor re-born: There was never any serious hope that budget differences could have been resolved in a united front over Syria. The differences over the budget – much less over Syria – were and remain far too great. There was a narrow chance that Members of Congress would want to avoid exposure to charges of failing to fund protection for the troops in the field should the planned unmanned air attacks somehow turn into deeper involvement. There was perhaps an even narrower chance that Members would see in the foreign-policy tension a risk to the global and national economic recovery, and would therefore seek to minimize any additional tension through economic policy itself. But any relief through those channels most likely would have been only temporary, and the drop in the barometric pressure on the Syrian front probably renders those prospects moot for the relevant duration.
So we are left with the status ante Syria, which is to say by all indications an insoluble conundrum. That fact was only reemphasized when the House leadership pulled the bill to enact appropriations at the new and reduced post-sequester level until December 15 of this year. It would have been only a temporary “continuing resolution” (or CR), but still a breather beyond the end of the fiscal year on September 30.
You probably have seen the following calculations on the blackboard, but it might be worth systematizing them just a bit more as we prepare to enter the next phase of chaos.
I have been invited to join a panel discussion at the annual meetings of the National Association for Business Economics (NABE) next week, on the topic of the “The Great Deleveraging” after the financial crisis. Following is a summary of the thoughts that arose from preparing for this exercise, concentrating on the household sector. (The panel as a whole will cover all sectors of the economy.)
This financial crisis, like virtually all downturns and crises that preceded it, arose in considerable measure because of excessive leverage in some sectors of the economy. Important economic actors found themselves overextended and unable to meet their obligations or to spend, and their cutting back on their spending cascaded throughout the economy, causing other actors to find themselves overextended, and resulting in a massive downturn. Resumption of normal consumption and economic growth will require that those afflicted actors get their balance sheets back in order. The “paradox of thrift,” as many households try to restore prosperity by cutting back simultaneously and thereby further reducing sales and incomes, will afflict us until this “deleveraging” process is completed.
So, where do we stand in this deleveraging process? How much progress has been made? How long until more-normal borrowing, lending and spending is underway, and growth can begin to drag us back toward full employment of the work force?