The grandstanding of the R's that will likely lead to a shutdown seem to demonstrate obliviousness to the impact to all of us if this goes down.
The shutdown is stupid and expensive and runs contrary to BOTH democratic and republican values, yet the R's seem committed to running us off this cliff.
Analysis and arguments against that you can use with your tea party friends, after the jump...
I don’t mean to patronize anyone, but I’m going to use small words in this diary that even a congressperson might understand.
If you run a business, there are reasons that you don’t capriciously decide to “shut down for an undetermined period of time”.
1) It is expensive – the fixed costs associate with having a business continue whether you are active or not; real estate, machinery, insurance, interest on any debt...
2) You lose customers – Existing and potential customers who tried to call you and weren’t helped find other suppliers.
3) You lose your best employees - Employees present a special problem... do you pay them for not working and drive up your expenses? Do you declare the stoppage a “furlough” and not pay them? Here’s a hint... if you abuse your employees, the ones you lose first are not the ones you might wish to lose... the marginal performers know their options are limited and will stick it out. Your best employees are the most mobile, and I hear that your competition just had a sudden uptick in sales and might be looking...
4) There are hidden costs in stopping activities underway and then trying to restart them (more on that later).
There are reasons why allowing the government to “shut down for an undetermined period of time” is a really stupid and expensive proposition.
We get a taste of this in California about once a year when brinkmanship in the legislature causes a “surprise” lack of a budget on the first of July (something like 25 of the last 27 years). Last year it was October before the stalemate was resolved. What it means is that the government can’t pay its bills. And that is very expensive for everyone.
First, let’s look at the businesses who supply goods and services to government. Both state and federal government have LOTS of contracts for goods and services. Some government leaders prefer to use contracts to get things done rather than hire workers... it’s an ideology thing we won’t go into here... not always a bad idea, not always a good idea – something we can explore another time.
For small business suppliers (California has a preference for small business suppliers, they are the salt of the earth. Some leaders claim that small business is the engine of the whole American economy!)... who have provided goods or services in good faith, it can mean bankruptcy. The government passed laws that say you MUST pay your employees and your taxes, even if your creditors don’t pay you (the law doesn’t apply to the government itself... but it is vigorously enforced against those evil suppliers). A small business may have only a handful of employees, but if it doesn’t pay the wages owed, it is subject to extreme penalties. Some suppliers can get lines of credit, but unsecured credit is hard to find and very expensive for a small business. If credit costs 10% and your profit margin was 5%, you are finished. Perhaps if you lay off all of your employees, you can scrape by? See analysis above about who is the first to leave when you abuse your employees. Small business is the salt of the earth... and not paying them screws them.
What about larger suppliers? This ends up being an interest free loan from them, doesn’t it? No. If they can afford to finance the debt and survive, they will likely receive a penalty payment when the 4-month delayed payment finally arrives. It is disruptive to their business and expensive, but they quickly learn to PRICE THE RISK INTO THEIR OFFERING so that the government will pay a higher price for goods and services hereafter.
What about the largest suppliers - the big consulting firms that build roads and bridges and buildings and IT systems? Surely there is no harm in pausing THOSE parasites? Ah, spoken like someone who has never read a contract for services. Here’s where some BIG costs and disruption arise. A contract is an agreement between parties about who does what. The lawyers that write contracts try to assure they are fair to both parties. If one party doesn’t hold up their end of the bargain, then the other party has remedies and relief from its obligations.
If I agree to build an IT system for you for a fixed price in six months, PROVIDED you participate in design sessions every Friday, guess what happens if you miss design sessions? My commitment is void. You didn’t hold up your end of the bargain. You can terminate the contract, but you will have to pay me for the work done to date (whether it is useful to you or not). Perhaps we agree to pause the project indefinitely until you decide to “un-shutdown”? Do you think my team stands by earning nothing waiting for the restart? Unlikely. The team is going to move on to other projects and clients who pay their bills. When your project restarts, the odds of restarting with the same team diminish rapidly the longer the project was paused. This means the terms of the re-negotiated contract (because your non performance voided our original agreement) when we restart require paying (again) to orient the new team to the project. Key team members, skills or equipment might not be readily available when you are ready to restart, causing additional delays. The six-month commitment is no longer valid. Your six-month project may now be a more expensive (3 + length of delay + 4) month project.
Imagine that happening, to some degree, on EVERY PROJECT being done by the federal government. Here’s where it gets scary. Projects don’t happen in a vacuum, they are often interconnected parts of a larger whole. While it doesn’t always run with clockwork precision, larger programs consist of many smaller projects. Picture an air traffic controller trying to coordinate the take-off (start) and landing (finish) of hundreds or thousands of small projects. Now imagine that every single project, once on a somewhat predictable schedule, is delayed by an arbitrary random amount.
Looks like we picked a bad day to give up smoking/drinking/sniffing glue...
What does this look like?
The cement is delivered to the construction site a month late, but the temporary structure that was supposed to protect it from the weather is two months late. (Sorry about the ruined cement. You will need a contract to carry away the scrap, and another to purchase more cement.... cha-ching! Your costs go up again...)
The construction team tries to get to the site of the new bridge with heavy equipment that costs $100K per day... but the road to the job site hasn’t been paved yet because they are waiting for cement (some moron didn’t put the bag delivered earlier in the shed and they got wet), so the heavy equipment is delayed 10 days.... cha-ching! And there’s another million that’s easy to count...)
Because the old bridge was at the end of its useful life and the new bridge has been delayed, the now condemned old bridge is closed, requiring every citizen who needs to cross the river to drive an extra hour each trip for a month.
In project management and engineering circles, this is sometimes called a “cascading failure”. It’s like an avalanche, at first glance it’s just a little snowball... but before you know it you have devastation.
Like the business context, we can foresee four negative effects of a “shutdown”
1) It is expensive
2) You lose customers
3) You lose your best employees
4) There are hidden costs in stopping activities underway and then trying to restart them
Let’s revisit number 2...
We need to think about who the government’s customers are – us. Government shut down doesn’t just mean welfare queens can’t make their Cadillac payments (not trying to be disrespectful here... just honoring a time worn metaphor of the far right). It also means...
Veterans who have served the country honorably will not receive the services they have earned from the country that are administered by the VA.
Senior citizens who have questions for the Social Security Administration about benefits that they have earned will not be served.
Any citizen with a question for their government, or who is seeking a service that the government has agreed to provide, is thwarted.
People in a mythical town who live on the wrong side of the river have a much longer commute which leads to family strife, divorce, broken homes, alcoholism, juvenile delinquency, and increased prison population (so much for family values).
In business, losing customers means they seek another provider. A shutdown is not good for the citizens, the government employees, the provision of government services, the large and small businesses that provide products and services to the government, or the people who have to pay the needless expenses. I think we should seek another government if this one demonstrates it cannot serve us.
Our constitution allows us to do that when we vote. We can choose a different government at the ballot box if we can figure out who is responsible. Let me check my constitution....
Article 1, section 7 “All Bills for raising Revenue shall originate in the House of Representatives...”
Looks like we need a change in 2012, eh?
I think even the pro-corporation, pro-family values folks who want to assure their taxes are spent wisely can agree to that (if they are paying attention).