Wednesday, October 16 concluded three weeks of government shutdown. Congress’ inability to agree on a federal budget by the deadline led to a complete furlough of all “non-essential” government employees and agencies. All those who were not considered necessary were sent home without pay until the government could figure out the budget. Over the three-week shutdown, news agencies and politicians alike spoke grandly about the shutdown and what it signified for our country. Yet despite the fanfare, the U.S. government has faced this sort of financial crisis many times before.
Since 1976—when the Budget and Impoundment Control Act was passed, giving Congress an October deadline—there have been 17 government shutdowns. But today’s politicians and critics argue that we have learned nothing from these past shutdowns. “I’ll buy you a Coke Zero if you can tell me what the government shutdown was about in ’95,” exclaimed Republican Senator Lindsey Graham, “What was the issue? Nobody remembers!”
In the fall of 1995 there were two shutdowns under the Clinton administration. The first shutdown began on November 14 and lasted through the 19th. Less than a month later, governmental employees and services were again furloughed for three weeks from December 16, 1995 through January 6, 1996. Then, as now, Congress was deeply divided and frequently unable to compromise. But this is only the beginning of the list of similarities between the 1995 situation and our most recent shutdown crisis.
In 1995, Bill Clinton faced a hostile Republican Congress led by Speaker of the House Newt Gingrich. Republicans lobbied for their “Contract with America” platform, which promoted smaller government. Gingrich and his comrades promised to lessen regulation and government involvement in the economy as well as balance the increasingly unstable budget by passing a Congressional amendment that would require a balanced budget in seven years. This disagreement was only compounded by an argument over Clinton’s Medicare project and its solvency. Clinton vetoed the budget, and in response, the Republicans in Congress refused to pass a stopgap measure to fund the government. The government was shut down for six days. Government employees were sent home and “non-essential” federal functions ground to a halt. The first shutdown of 1995 concluded on November 19th, when President Clinton agreed to balance the budget in seven years with the addendum that the budget must “protect future generations, ensure Medicare solvency, reform welfare, and provide adequate funding” for projects such as Medicare.
However, the 1995 Congress was unable to agree on the implementation of the new budget, and the government was promptly shut down again on December 16th, remaining this way through the start of the new year. Republicans were in no rush to pass a temporary budget, as they believed that the prospect of default gave them significant leverage in negotiations. But much to the chagrin of the Republicans in Congress, the treasury at the time had the power to borrow from government employee retirement trust funds and was able to prevent the threat of default for at least a couple of months. With their leverage gone, Republicans were more willing to negotiate and the parties eventually reached a compromise on January 6, 1996.
Republicans were largely blamed for the 1995 shutdowns; the public condemned them for prioritizing their political agenda over the country’s economic stability. Republican House Speaker Newt Gingrich, who had been at the forefront of many of the arguments, fell sharply in popularity. Conversely, President Clinton was lauded as having “won” the shutdowns and benefitted from a boost in approval ratings from a projected 48% approval before the shutdowns, to 53% after. Many analysts believe this boost carried through and helped Clinton win re-election later in 1996. The shutdowns of 1995 and 1996 cost the equivalent of at least $2.1 billion in today’s dollars. Economists explain that the shutdowns slowed down economic growth greatly that quarter, but that the economy grew at least as much as it had lost in the next quarter.
This year’s shutdown resulted from many of the same mistakes as the 1995 shutdown. There was again harsh contention between a Democratic president and Republicans in Congress. However, the current Republican leader Mitch McConnell is the head of the minority party and doesn’t have the same amount of support that Gingrich boasted in 1995. The impasse over budget spending was coupled with a Republican plan to deprive funding for President Obama’s universal healthcare program, much like the side arguments over Medicare that occurred in 1995. This most recent shutdown lasted so long because current Republicans, like those in 1995, saw the threat of default as leverage in debate. Our current deficit is estimated to be around $750 billion—three times what it was at the beginning of the last shutdown crisis—so defaulting would be even more of an economic calamity today.
One of the main differences is that unlike Clinton in 1996, Obama is not up for reelection—which is lucky for him because he has not garnered the same surge in approval post-shutdown. Additionally, public opinion places blame fairly equally on both parties for the 2013 shutdown, with the Republicans perhaps bearing a slightly heavier burden of the load.
The real question, though, is if today’s deeply partisan government will be able to avoid the more serious error of the 1995-96 Congress and escape a second shutdown. If negotiations fail, we may see the same plunge back into crisis—sequestration or deep, comprehensive budget cuts. Some Republicans see this threat as another favorable bargaining chip on their side, but it is largely agreed that sequestration would be profoundly damaging to the U.S. economy. To avoid this, Congress has already agreed that the “perfect” budget compromise they have been aiming for over the past few years is impossible, and that sights must be set lower. But it remains to be seen if the partisan rancor that has become so common in today’s politics can be set aside to firmly resolve this financial crisis, or if we will suffer similar consequences to the crisis of 1995.