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Obama administration: Shutdown would hurt economy

By JIM KUHNHENN and RICHARD LARDNER

Associated Press

POSTED:
LAST UPDATED: 10:03 a.m. HST, Apr 06, 2011


WASHINGTON >> The Obama administration warned Wednesday that a federal shutdown would undermine the economic recovery, delay pay to U.S. troops fighting in three wars, slow the processing of tax returns and limit small business loans and government-backed mortgages during peak home buying season.

The dire message, delivered two days before the federal government's current spending authority expires, appeared aimed at jolting congressional Republicans into a budget compromise. Billions of dollars apart, congressional negotiators were working to strike a deal by Friday to avert a shutdown by setting spending limits through the end of September. The last such shutdown took place 15 years ago and lasted 21 days.

President Barack Obama telephoned House Speaker John Boehner Wednesday, and Boehner's office said the speaker told Obama he was hopeful a deal could be reached.

As the talks continued, the White House sought to put the prospect of a shutdown in terms people would care about, warning even that the beloved Cherry Blossom parade in the nation's capital would be wiped out. The Smithsonian Institution and national parks around the country would also be closed.

A shutdown would come at an especially busy time for the Smithsonian. The Cherry Blossom Festival, which concludes this weekend, draws many tourists to an area near the museums. The Smithsonian counts about 3 million visits each April and has already sold 23,000 IMAX movie and lunch combos to school groups for the month.

Under long-standing federal rules, agencies would not be affected that provide for U.S. national security, dispense most types of federal benefit payments, offer inpatient medical care or outpatient emergency care, ensure the safe use of food and drugs, manage air traffic, protect and monitor borders and coastlines, guard prisoners, conduct criminal investigations and law enforcement, oversee power distribution and oversee banks.

Mail deliveries will continue in the event of a shutdown. U.S. postal operations are not subsidized by tax dollars.

According to the shutdown scenario described by the administration, the government would have to significantly cut staffing across the executive branch, including workers at the White House and civilian employees at the Defense Department; close to 800,000 workers would be affected. Congress and the federal court system will also be subject to a shutdown.

At the Pentagon, defense officials were finalizing plans that would lay out how the department would deal with a shutdown. But they already have acknowledged that U.S. military troops — including those in war zones — would receive one-week's pay instead of two in their next paycheck if the government closes.

Military personnel at home and abroad would continue to earn pay, but they won't get paychecks until there is a budget agreement and government operations resume.

Col. Dave Lapan, a Pentagon spokesman, said that the Pentagon will be open on Monday and will be staffed. He said decisions on which Defense Department employees must report to work will depend on their jobs, rather than where they are based.

Key national security responsibilities, including operations in Afghanistan, Iraq and Libya and earthquake assistance to Japan would not be interrupted by a shutdown, the Pentagon said.

The CIA also won't be closing, though it will be drawing down some non-essential personnel, to be in compliance with federal law, according to a senior intelligence official, speaking on condition of anonymity to discuss matters of intelligence.

Officials familiar with the shutdown say essential counterterrorism functions in other parts of the intelligence community will continue, like monitoring of the terrorist watch lists, and essential intelligence collection and analysis.

At the Internal Revenue Service, the tax filing deadline remains April 18 — delayed three days because of a local holiday in Washington. Tax audits, however, will be suspended if there is a shutdown.

The IRS won't process paper returns during a shutdown. Those expecting a refund should file their returns electronically and ask that the money be deposited directly into their bank accounts. Tax payments are welcome, though it is still unclear whether help lines for taxpayers will be staffed.

Social Security payments will continue to be delivered, and applications for benefits will continue to be processed. But some services will be limited, Social Security Commissioner Michael Astrue said.

"The checks will continue to go out. The problem will be on an extended CR, it will be increasingly difficult to get changes in address, changes in status, and those types of things done," Astrue said.

Astrue said Social Security headquarters and regional offices will be closed. Some limited services will still be available at field offices, but the details are still being worked out, he said.

Medicare would still pay medical claims for its 48 million recipients, who are mainly seniors but also several million younger people who are permanently disabled or have kidney failure. Payments to doctors, hospitals and other service providers could be delayed, however, should a shutdown continue for several months.

At the National Institutes of Health, groundbreaking medical research would experience a disruption. Patients already being treated at the NIH's famed hospital in Bethesda, Md., would continue to get that care, but new patients could not be admitted. Likewise, no new studies of drugs or other treatments could begin.

The Federal Housing Administration, which guarantees about 30 percent of home mortgages, would stop guaranteeing loans. The issuance of government backed loans to small businesses would be suspended, according to the White House.

The Obama administration said the impact on the housing market would be more severe than in 1995, the last time there was a government shutdown. The Federal Housing Administration accounts for 30 percent of the mortgage market, nearly three times the amount 16 years ago.

The nation's 15,700 air traffic controllers would keep working, as would many of the Federal Aviation Administration's 6,100 technicians who install and maintain the equipment for the nation's air traffic control system.

FAA inspectors who oversee airlines' compliance with safety regulations probably would continue to be at work. But it was unclear Wednesday whether the safety inspectors assigned to aircraft manufacturers would be told to stay on the job. Support personnel at the agency would be told to stay home.

Almost all of the Federal Transit Administration would close and that means local transit agencies would have to wait longer to get federal aid. Most of the National Highway Traffic Safety Administration, which issues auto recalls and makes grants to states for safety campaigns, would also close.

Operation of the International Space Station would be unaffected. NASA's Mission Control in Houston would continue to work around the clock to keep watch.

But it's unclear what impact there might be on preparations for the final two space shuttle missions, said NASA spokesman Bob Jacobs. Endeavour is due to lift off April 29, Atlantis on June 28.

Among other consequences cited by the administration:

—The Environmental Protection Agency would cease issuing permits and stop reviewing environmental impact statements which will slow approval of projects.

— Most government websites would not be updated, unless they were deemed essential.

— The Environmental Protection Agency will stop issuing permits of industrial facilities for air, land and water pollution limits.

— Federal courts would be unable to hear cases as employees like clerks, stenographers, bailiffs, and security guards would not be at work.

___

Associated Press writers Lolita Baldor, Anne Gearan, Joan Lowy, Lauran Neergaard, Stephen Ohlemacher, Ricardo Alonso-Zaldivar, Brett Zongker and Marcia Dunn in Cape Canaveral contributed to this report.






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