The ongoing partial government shutdown is currently in its third week and is quickly closing in on the December 1995-January 1996 impasse — that lasted 21 days — as the longest U.S. shutdown on record. Considering that, as well as President Donald Trump’s recent threats to keep the shutdown going for “months, or even years” if he has to, Harvard law professor Noah Feldman cautioned that keeping the government closed for an extended period of time could end up destabilizing the world.
In an op-ed published Sunday on Bloomberg, Feldman suggested that the reaction of people seemingly accustomed to Trump’s unconventional remarks and actions might point to a long shutdown not having much of an effect on the stability of the world’s governments and economies. However, he added that there is currently a good chance the impasse could shake things up negatively, with one reason being the “message of underlying disagreement” being conveyed by both sides — Trump and the Democratic lawmakers unwilling to fund his proposed border wall.
“If the quasi-constitutional norm that Congress and the president compromise to fund the government is broken, it means the assumption that the public wants government will have to be re-evaluated,” Feldman wrote.
Moving on to the next reason why extending the shutdown could upset the world at large and not just the U.S. government, Feldman explained that it is the responsibility of a “functional” federal government to maintain stability, adding that national security is just one of the many variables that could determine whether a government is stable or not. While short shutdowns don’t normally cause such problems due to the government’s perceived ability to “play catch-up” once business resumes as usual, longer ones cast doubt as to whether it is possible to make up for all the lost opportunities to regulate social functions.
Although Feldman stressed that bad actors, people, or entities with criminal convictions, won’t “immediately” roil the stock market through insider trading or break environmental laws while the government is closed, he posited that extending the shutdown could lead to a greater number of federal violations going unpunished.
“People will eventually begin evaluating whether the costs of compliance outweigh the benefits of violating the regulations — less enforcement will lead to more rule-breaking. The odds of being caught are always part of the calculus. Less regulatory enforcement means lower odds of being caught – hence more violations.”
As for the rest of the world, Feldman predicted that the gradual, yet progressive erosion of the institutions that preserve political and economic stability in the United States won’t be lost on other countries. In turn, he added, this could make world leaders less confident in both the U.S. government and its economy, as the strong fundamentals that make the U.S. attractive to investors might also be affected in the long-term by an extended shutdown.
Feldman did not elaborate much on how the broader U.S. economy could specifically be affected by the ongoing shutdown, but this topic was visited recently by an economist affiliated with a Washington, D.C.-based think tank.
Earlier this week, American Action Forum director of fiscal policy Gordon Gray broke down the cost of a typical shutdown into three components — federal budgetary costs, forgone services, and economic disruption, the latter of which was described as the most “amorphous” of the three. While he admitted that the economic costs are hard to estimate, Gray cited statistics that showed how the October 2013 shutdown, which lasted 16 days, slashed GDP growth in one quarter by about 0.2 to 0.6 percent, or $2 billion to $6 billion.