We’ve heard a lot about congressional in-fighting over the US government’s debt ceiling, and social service providers are bracing themselves for another possible government shutdown. In this article, we explore the potential impacts of the United States defaulting on its debt.
The United States government reached its spending limit on January 19, 2023, and could end up defaulting on its debt by June, which could have far-reaching economic repercussions for social services and populations vulnerable to adverse social determinants of health (SDoH).
What would happen if the current House and Senate failed to enact funding legislation by June? How should health and human service organizations prepare for the government shutdown and ensuing economic consequences?
The Debt Ceiling Recently
This spending limit, the almighty debt ceiling we’ve heard so much about, has been around since 1917. However, the first government shutdown didn’t start until 1976, spurred by the Congressional Budget and Impoundment Control Act of 1974. Since then, there have been 20 federal government shutdowns, none of which resulted in the United States defaulting on its debt but easily could have without funding legislation.
In 2011, the Obama White House narrowly avoided a government shutdown by negotiating with Republican lawmakers, who used the possibility of debt default—and its financial consequences—as leverage to get spending cuts. (That almost-shutdown ended up costing the United States its AAA credit rating.) Since that time, financing the government has transformed from a routine budgetary vote to an entrenched partisan fight whenever the debt ceiling is reached.
If historical trends are to be any indication of the future, the debt ceiling won’t likely get raised without some kind of spending cuts to satisfy Republican lawmakers. And so far, Republicans have no unified plan as to what spending they want to cut, proven further by the 24 GOP senators who signed a letter—which lacked visible support from high-ranking Republican Senators McCarthy and McConnell—with demands for spending cuts in exchange for their votes to raise the debt ceiling.
Further, the GOP caucus shows further signs of conflicting visions, demonstrated by the 15 series of votes it took to instate a new speaker of the House, Kevin McCarthy. That magnitude of disagreement within a single party on allotting the speaker’s mantle hasn’t happened since the Civil War era.
Past Government Shutdowns and Social Services
The 2018–19 government shutdown was the longest in history, at 35 days long. The shutdown had admittedly minor effects, overall, across homeless services throughout the United States, but domestic violence shelter programs were severely affected because of the Violence Against Women Act (VAWA) expiring.
This expiration occurred because the law’s future was tied to the debate over funding then-President Trump’s border wall. It wasn’t until 2022 when VAWA was renewed.
In the 2018–19 shutdown, grants that funded HUD’s Continuum of Care (CoC) Program were delayed by one week because HUD workers still had to execute on grant funding that was previously filed, which caused a domino effect of other funding to be delayed. However, HUD was prepared for a much more prolonged shutdown, as evidenced by this FAQ, which prepares for many contingencies that we might have to plan for this year, such as:
- Severely limited employee headcount for answering emergency calls
- No more scheduled meetings, monitoring and technical assistance visits, or trainings
- Indefinite delays in NOFA deadlines and subsequent appropriations (arguably the most significant impact)
- Limited FHA lending activities
- Limited grant funding, except for HUD-funded homeless assistance
HUD’s response this year might not mirror the last shutdown’s, so there’s a strong possibility the Community Compass Program would also be affected if the government isn’t funded by June.
Office of Refugee Resettlement (ORR)–funded programs would likely be severely affected by a government shutdown, as the last one led to many refugees becoming stranded in a “limbo” state, without any clear path forward to the United States.
At this stage of the government shutdown debate, prescriptive advice would be premature, as the magnitude of effect would depend on the magnitude of the shutdown. However, Eccovia will be watching this issue closely and provide future recommendations when needed.
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