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Restarting U.S. Government Seen as Harder Than Shutdown

Oct. 17 (Bloomberg) -- On today's "The Real Deal," Michael McKee examines the economic cost of the U.S. government shutdown. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Starting up the government will be harder than it was to shut it.

The legislation passed by Congress last night to raise the debt ceiling and fund the government into 2014 will bring hundreds of thousands of federal workers back to their jobs and reopen national parks and museums. Yet it may be weeks or even months before the government resumes issuing loans, payments and contracts at a normal pace.

“This has been very disruptive,” Larry Allen, president of Allen Federal Business Partners, a contract consulting firm in McLean, Virginia, said in an interview. “The shock wave will last for months.”

The partial halt in government operations was shorter than the budget shutdowns in 1995 and 1996 that lasted a total of 26 days. This year’s disruption has been far broader in scope, said Barry Anderson, who was assistant director of the White House Office of Management and Budget during the fiscal 1996 shutdown.

Congress had completed seven of its 13 annual appropriations bills funding agencies in the previous stoppage - - leaving vast parts of the government still working. This time not a single agency funded at Congress’s discretion had final budget approval.

“Things are very different now,” Anderson said.

Photographer: Mark Wilson/Getty Images

A U.S. Park Service worker picks up trash in front of the Lincoln memorial on the morning after a bipartisan bill was passed by the House and the Senate to reopened the government and raise the debt limit, on October 17, 2013 in Washington, DC. Close

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Photographer: Mark Wilson/Getty Images

A U.S. Park Service worker picks up trash in front of the Lincoln memorial on the morning after a bipartisan bill was passed by the House and the Senate to reopened the government and raise the debt limit, on October 17, 2013 in Washington, DC.

Federal agencies were instructed to begin opening offices today in a “prompt and orderly manner,” according to a memo from OMB Director Sylvia Burwell that cleared furloughed employees to return to work.

Bill Signed

“We will work closely with departments and agencies to make the transition back to full operating status as smooth as possible,” Burwell said in the memo released early today after President Barack Obama signed the bill ending the shutdown.

Understanding the Debt Ceiling

The 16-day halt in operations at many federal agencies shaved at least 0.6 percent from fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the U.S. economy, Standard & Poor’s said yesterday.

The cost of restarting the government is hard to tabulate. A study conducted by the OMB after the fiscal 1996 shutdown pegged the closing’s cost at $1.4 billion, or about $2 billion in today’s money. That figure didn’t include costs incurred when workers returned, though those expenses were termed “significant” by John Koskinen, deputy director of management at OMB during the previous shutdown, during a hearing of the House Subcommittee on Civil Service in December 1996.

Uncounted Costs

“Significant additional costs, that cannot be determined at this time, include interest payments to third parties” when the government doesn’t pay its bills on time, he said. “There will also be additional personnel costs necessary to deal with the backlog of work resulting from the shutdown.”

Those expenditures may be billions of dollars, said Charles Tiefer, a law professor at the University of Baltimore who has studied shutdowns.

While he is aware of no study that has calculated the cost of restarting the government, Tiefer said the biggest line items likely include the inability of agencies to carefully audit the huge backlog of payments including those to the IRS and Medicare claims. Others come from the difficulty of health and safety regulators such as the Environmental Protection Agency to pick up unresolved investigations, he said.

“When they resume their work, the trail will be cold, and the work lost,” Tiefer said in an interview. “That is by far the most costly.”

Technology Reliance

A reliance on information technology at U.S. agencies also poses pitfalls as workers return to their posts.

The federal government is more dependent on the Internet, operating huge networks that offer online services and mobile platforms that link employees, citizens and businesses directly to digital forms and applications.

Stan Collender, a former congressional appropriations aide, said the impact will range widely by agency.

“It’s more difficult now, because there are software and hardware issues,” said Collender, managing director of Qorvis Communications LLC in Washington. “But it will vary by facility to facility -- depending on their information technology and particular security approaches.”

Agencies that continued to collect large amounts of data measured in tera- or petabytes should reboot systems to ensure the networks are operating properly after a period of lax monitoring, said Carmelo McCutcheon, “chief evangelist” at Hitachi Data Systems Federal Corp., a private-cloud storage contractor based in Reston, Virginia.

‘Fewer People’

About two petabytes of data are housed in all academic research libraries in the U.S.

These systems will take an average of four to eight hours to bring back online, and if there are glitches, the process could take 16 hours or more, McCutcheon said. More significant delays will occur when analysts have to sift through data that accumulated over the past three weeks. The chance of errors will increase, he said.

“What happens if something gets missed because you have to look at three times the amount of data with fewer people?” McCutcheon said.

At the same time, the impact of the shutdown was mitigated by decisions at some agencies to recall some furloughed workers. That included a move by the Pentagon to bring back about 90 percent of its 350,000 civilian defense employees and the Federal Aviation Administration to recall 800 furloughed workers who aid with inspections.

Application Backlogs

“The entities that are affected are much more targeted than in previous shutdowns,” Alan Balutis, director of the Internet Business Solutions Group for Cisco Systems Inc., based in San Jose, California, said in an interview. “I don’t see a big effect.”

Balutis, who headed the management and budget office for the Commerce Department during the 1990s shutdown, said nonetheless that some effects of this month’s halt in federal operations may linger for weeks. Returning workers will grapple with backlogs in applications for everything from veterans’ health benefits to visas for foreigners, he said.

Delays will be far reaching. Just ask Chris Niedermayer, who during the fiscal 1996 shutdown was working at the Agricultural Stabilization and Conservation Service, now known as the Farm Service Agency. The agency pays out hundreds of millions of dollars at a time to farmers whose crops have been destroyed by a flood, drought, tornado or other natural disaster.

Angry Letters

When the service came back on line in 1996, workers were met by a backlog of work “that was hard to really recover from,” he said. It took weeks for the agency to send checks out, during which farmers and businesses in disaster areas sent angry letters and vented their frustration in phone calls.

In the end, an increased workload becomes normal. “People are expected to do more and you don’t get anything for it,” Niedermayer said.

Niedermayer watched the latest shutdown as a federal contractor. Now senior knowledge officer at Battle Resource Management Inc., a consulting firm in Washington, he saw what was a profitable year turn into a losing one. Employee bonuses were depleted, and the company lost a few staff members who left for other work.

“As a contractor, you don’t ever really recover from a financial standpoint,” said Niedermayer, whose firm does work for the Homeland Security, Interior and Treasury departments and some intelligence agencies. “It’s devastating.”

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Allan Holmes in Washington at aholmes25@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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