smart spending

Who loses in a government shutdown?

The thought of a government shutdown makes many U.S. consumers cringe, especially if they depend on the federal government for medical care, retirement benefits and other critical services.

But even without a budget in place, the federal government never fully shuts down.

"In a government shutdown, there is some discretion for the government to protect the vital agencies -- those related to national security -- so it's not like they're going to bring all the soldiers home," says Marc Goldwein, policy director at the Committee for a Responsible Federal Budget in Washington, D.C. "But most government functions that we are used to will stop during a shutdown."

The hard part for consumers is it's difficult to predict which operations will be deemed essential and which will be halted. It's mostly up to the discretion of the Obama administration.

"It all depends on what the president prioritizes and what federal unions are willing to cooperate with," says Richard Parker, a senior fellow and lecturer at Harvard's Kennedy School of Government.

Past government shutdowns -- the most recent was in 1995 -- can shed some light on how the federal government will proceed. But there's no way to know for sure what will be considered a priority.

Injecting further uncertainty is the question of when a new budget will be passed to get the government up and running again.

"The longer it goes, the more damaging it becomes because of the accumulation of unpaid bills and more people being affected by not being paid," Parker says.

Here's a rundown of who would likely suffer most from a government shutdown, and who would escape relatively unscathed.

Biggest losers in a government shutdown

Government contractors and vendors. Government spending accounts for roughly one-fifth of the U.S. gross domestic product, and much of that adds to the bottom lines of government contractors and vendors. A government shutdown likely would mean that payments to vendors and contractors would stop, Parker says.

International travelers. During the last government shutdown, the Department of State slowed the application process for new passports and visas, leading to long delays for those seeking to travel internationally.

Taxpayers expecting a refund. A government shutdown could delay the issuance of tax refund checks and the processing of tax returns, especially for those who sent in paper returns.

"The (Internal Revenue Service) would basically shut down, so there would be no one there to process your taxes or send you your refunds," Goldwein says. But you still need to pay your taxes on time.

Recent retirees. If the last government shutdown is any indication, new applications for Social Security benefits would be significantly slowed, resulting in lengthy delays for new beneficiaries.

"There will be no employees on the job to process the applications, which require more intense handling than just simply the mailing of checks, which is fairly automated," Parker says.

Government employees. Nearly all government workers would see their paychecks delayed by a government shutdown. Those deemed "essential," such as active military, corrections officers, firefighters and utilities, would continue working with reduced or delayed pay until things returned to normal. It is likely they'd be reimbursed their missing salary, Goldwein says. Nonessential workers would be furloughed, possibly without pay.

New Medicare and Medicaid patients. Applicants for Medicare and Medicaid benefits likely would face delays because there wouldn't be employees to process them.


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