Congress likely to pay workers sent home during the shutdown

October 5, 2013

The government shutdown continues, but at least one major question has been resolved. The House voted unanimously Saturday to provide back pay for the nearly 800,000 federal "non-essential" workers who have been sent home.


(AP)

The Senate is expected to approve a similar bill, and President Obama has already said that his administration would "strongly support" the legislation.

This bill won't end the shutdown, but it will have a few notable effects if it gets signed into law. Among other things:

It's better news for federal workers. Nearly 800,000 federal workers deemed "non-essential" have been sent home, and it was unclear whether they would ever get paid during this period. That was left to the discretion of Congress. Now, if the House bill is signed, these workers will get back pay for the time they missed as soon as the shutdown ends.

The downside is that no one knows when the shutdown will end, and furloughed workers may have to stretch out their finances until then. (Many workers can collect unemployment benefits during the shutdown, although they'll have to repay it once they finally get their next paycheck.)

It's good news for the economy. Analysts at J.P. Morgan had estimated that federal furloughs would reduce national income by a total of $1.3 billion per week. As a result, they said, the shutdown could shave 0.12 percent off fourth quarter GDP growth for each week it goes on.

Providing federal workers with back pay will blunt much of that damage (or at least shift that growth into the next quarter). However, the House bill won't blunt other economic effects of the shutdown, such as the millions each day that tourist locales around closed national parks are losing.

It's bad news for the deficit. If this retroactive bill passes, the upshot is that Congress will be paying nearly 800,000 employees for not doing any work during the shutdown. That means the non-functioning parts of government will continue to cost taxpayers money. The shutdowns in 1995-1996, which lasted 27 days in all, cost about $2 billion in today's dollars.

The House and Senate could, of course, end all that by approving bills to fund and reopen the government. So far, however, the two chambers are at an impasse.

Update: In other big news, the Department of Defense now says that it will recall "most" of its 400,000 furloughed workers next week, claiming that they're now essential after all. When that happens, that will cut the total number of furloughed federal workers down by about half.

The Pentagon's move won't necessarily affect military contractors, however. Note that Lockheed Martin is now planning to furlough 3,000 of its own workers next week due to the shutdown. (Those contractors won't be entitled to back pay.)

Further reading: 

--Everything you need to know about the government shutdown.

--Everything you need to know about the upcoming debt-ceiling fight.

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Ezra Klein · October 5, 2013