Budget Shutdown: Nonprofit Nightmares

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September 30, 2013; USA Today


As this is being written, our nation’s legislators are throwing spitballs at each other (in truth, mostly from the Republican side which, between Sen. Ted Cruz and House Republicans, has made the federal budget next to impossible to resolve). For all we know, despite the visual intransigence, with both sides talking to each other only through TV and cable news interviews, somewhere deep in the bowels of the Capitol the minions of Senate Majority Leader Harry Reid and House Speaker John Boehner are crafting a deal to avoid a government shutdown—perhaps, like the last budget showdown earlier this year, to be unfurled after zero hour.

All that being said, the public seems to be taking the pending shutdown in stride. Here in Washington, life goes on, particularly for the cognoscenti who remember the last shutdown—three weeks of it—during the 1990s, when President Clinton stared down Newt Gingrich, now the co-host of Crossfire. House Republicans eventually backed down and, despite Gingrich’s revisionist history, collapsed on a number of policy fronts.

But nonprofits shouldn’t write off what the current budget debacle means for them, shutdown or no shutdown. Here are our thoughts:

  1. If the two sides do reach a deal before or after October 1st, it will be only a short-term continuing resolution that will expire not in mid-December, as we had predicted last month, but as soon as mid-November—six weeks from now. As a budget cycle, that’s nothing; only a half of a quarter of the fiscal year. That means that most of the business of Congress will generally come to a halt, as the focus will immediately shift to the expiration of the short-term continuing resolution rather than generating new initiatives to address the nation’s economic and social problems. Stick in the national debt limit controversy that could emerge in mid-October, with the nation’s borrowing authority potentially expiring as early as October 17th, according to the Treasury Department, and assume that just about nothing is going to happen in Congress otherwise for the next couple of months. A do-nothing Congress will do less than it ever did.
  2. Expect some unhappy federal workers to be on the other end of the phone or email when government starts back up after a shutdown. As we noted last week, about 41 percent of the federal workforce will be furloughed in a shutdown, equivalent to 800,000 to 1,000,000 staff people. They will be staying home because they will have been deemed “non-essential.” These government employees aren’t ciphers, but people. The impact of being told that you aren’t really needed will not go down well. Making it worse will be the likelihood that, unlike earlier shutdowns, Congress is unlikely to appropriate money to pay these federal employees retroactively for their lost wages for whatever days or weeks they end up at home. A recipe for unhappy federal workers? You bet.
  3. The Republicans’ opposition to a budget deal is predicated on any number of strategies for undoing the Affordable Care Act. The press focuses on the more than 40 votes taken in the House of Representatives to kill the ACA, but the real Republican strategy has been to chip and cut and stymie and confuse, making national health insurance reform basically unworkable so that they can then claim that the program was destined not to work. That’s not to say that the administration hasn’t helped the cause along with some basic miscues and inexplicable delays in getting things up and running, as we have detailed with the exchanges and the navigators. But Republicans are counting on opinion polls in which they believe more than half of the American public is opposed to the ACA. What they don’t realize is that a solid chunk of the opposition comes from people who think the president and Democrats didn’t go far enough toward a single-payer healthcare system and gave away too much to the private insurers. But that doesn’t mean that they would prefer going back to the status quo ante. The Republicans are using the House’s role in the budget process to play a weak hand against the ACA. Whatever one might say about his inconsistent leadership on debt and budget issues through the first four years of his term, President Obama is not going to be bluffed into folding his hand at this late stage.
  4. Who knows what the stock market will do? If it were simply the shutdown on its own, with an endgame of reaching a full-year’s continuing resolution, we might guess that the stock market would take a little dip with the shutdown and rebound thereafter. In this case, given Congressional Republicans’ insouciant approach to federal budgeting, a short-term CR to be followed by a debt-ceiling crisis could have much worse effects on the NYSE, with big, deep plunges in the Dow and S&P. The importance of that to nonprofits should be abundantly clear. How many nonprofits are putting their cash reserves in the market? How many are doing daily or overnight sweeps on cash balances in their accounts? How many endowed foundations that have just watched their assets successfully rebuild from the recession that began in 2008 might see their resources plunge again with a toll on grantmaking?

It is a lot of noise to cut through. Wouldn’t it be grand if, as you read this, you had gotten to say, “Isn’t it great that Congress reached a deal with the White House and avoided the stupidity of a shutdown? Wouldn’t it have been awful had there been a shutdown? Phew, we escaped in just the nick of time.” Nope. Didn’t happen.—Rick Cohen

  • Kate

    As a nonprofit employee in DC, I think it’s a little silly to say that the Republicans are causing the stalemate. I’m not a Republican, but I’m just as disheartened with the Democrats who are instantly saying “no” to every resolution. What happened to the “compromise” most of these politicians were campaigning on just a year ago? Both sides only have their own best interests at heart.

  • Bob

    Compromise can only occur when both sides agree to sit down & talk.
    The House refused to go to conference EIGHTEEN times. Boehner agreed to it minutes before midnight as a ploy to try and shift blame on Democrats. Here’s a quote that’s pertinent this morning…

    “The modern conservative is engaged in one of man’s oldest excuses in moral philosophy; that is, the search for a superior moral justification for selfishness.” -John Kenneth Galbraith

  • Cecilia

    This is very well put…”making national health insurance reform basically unworkable so that they can then claim that the program was destined not to work.” That’s it in a sorry nutshell.