Photo by Obi – @pixel8propix on Unsplash

Today, in the middle of a catch-up conversation with a colleague at home in South Africa, on the happenings at the Harvard Business School (HBS) where I am participating, with 160 other executives from 42 countries, in the school’s renowned Advanced Management Programme, the colleague asked “So, tell me, how is the U.S. government shutdown affecting you?”

Before I had a chance to answer this question, the colleague rapidly asked another two questions with a palpable degree of concern for me “What causes a shutdown? Is everything at a standstill there?” Over, the next 45 minutes, as a South African, and therefore an external observer, I answered my dearly concerned colleague’s questions as follows.

Under the U.S. constitution, Congress must pass laws to spend money. If Congress can’t agree on a spending bill – or if, in the case of the two Clinton-era shutdowns, the president vetoes it – the government does not have legal authority to spend money. The result is the so called shutdown which in fact is really just a spending gap.

The first day of the shutdown, Tuesday 1st October, was the last day of the AMP185 4-day break.  I experienced the shutdown as rippling slowly and unevenly through Boston as I visited the famous tourist destinations. At the Science Museum, Faneuil Hall, Boston Naval Shipyard and the New England Aquarium, it was business as usual whereas across the city at the National Park Service Centre, a “closed” sign greeted visitors. Across the nation, it appeared that there was general disappointment as visitors found the national parks and monuments closed. Also, amongst the disappointed, are the more than 800,000 federal employees, who were furloughed because their work was not deemed essential to protect life or property. “Who were what?” my colleague asked. I must admit, I had never heard of this expression before and I had had to Google it. I learnt that:

Furlough (v.): to force an employee not to come to work and often dock his or her pay accordingly. When used as a verb—when one is furloughed—the word is essentially an invitation to stay home and take a pay cut, whether you like it or not.

Since the modern congressional budgeting process took effect in 1976, there have been a total of 17 separate U.S. government shutdowns. Here are some specifics for the last shutdown.

When did it take place? Dec. 5, 1995 to Jan. 6, 1996
How long did it last? 21 days
Who was president? Bill Clinton
Who controlled the Senate? Republicans, 53-47; Bob Dole was majority leader
Who controlled the House? Republicans, 235-198; Newt Gingrich was speaker
Why did it happen? Republican leaders demanded that the White House propose a seven-year budget plan that balanced when using the Congressional Budget Office, CBO’s economic forecasts, rather than The White House’s Office of Management and Budget, OMB’s, which were more optimistic.
What resolved it? Republicans caved, basically, and passed legislation to keep the government open. President Clinton, in turn, submitted a budget plan that the CBO said balanced the budget within seven years.

Here are some specifics for the current shutdown.

When did it take place? Oct. 1, 2013 to present
How long did it last? 5 days and counting
Who is president? Barack Obama
Who controls the Senate? Democrats, 51 (two Independents who caucus with the Democrats)-47; Harry Reid is majority leader
Who controls the House? Republicans, 242-193; John Boehner is speaker
Why did it happen? House Republicans demanded that the White House delay parts of the Affordable Care Act in return for approval of a mandatory government funding bill. President Barack Obama accused Republicans of taking the government hostage in order to sabotage his signature health care law, the most ambitious U.S. social program in five decades. He said: “They have shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans. I am happy to have negotiations but we can’t do it with a gun held to the head of the American people.”
What will resolve it? With no movement on both sides and no negotiations pending it is not clear. However, House Republican leaders are continuing with their efforts to reverse-engineer the government shutdown with attempts to restore funding to select, high-profile programmes and services through piecemeal bills. The Democratic-controlled Senate has said it will reject such partial measures.

I ended my discussion with my colleague by observing that if the mood on Saturday night at the TD Garden  where the Boston Bruins thrashed the Detroit Red Wings 4-1 was to judge by, the average American may not even know that there is a shutdown, or really care. On the other hand, whilst Wall Street investors seem to have shrugged off the shutdown, presuming that lawmakers wind find a solution they seem to be concerned about the looming 17th October deadline to raise the U.S. national debt level. The U.S. will run out of borrowed money no later than 17th October unless the U.S. Congress raises the $16.7 trillion debt limit.