University News

Shutdown could harm state economy

U. financial aid and research grants will be unaffected in the short term, Provost said

By
City & State Editor

After congressional quarreling sent the federal government Monday night into its first shutdown since the Clinton administration, Brown students and people across Rhode Island spent Tuesday considering how the closure will affect them.

The effects will be limited in the short term, but if Congress remains embattled for weeks or even months, consequences will begin to mount, said David Wyss, an adjunct professor of economics and former chief economist for Standard and Poor’s.

 

Short-term safety

The University is most worried about “Pell grants and other forms of financial aid,” Provost Mark Schlissel P’15 told The Herald.

The federal government has already paid the University all student aid necessary for the semester, but Schlissel said “if (the shutdown) lasts into next semester — which I’m very confident that it will not — then we’ll have issues with student support.”

Research should also remain unaffected by the shutdown in the short term, Schlissel said. Professors who receive grants from the federal government receive their funds at the onset of a project and will not lose access to it due to the shutdown, he said.

The two federal agencies responsible for a large share of federal grants to the University, the National Institutes of Health and the National Science Foundation, will be closed as long as the government remains shut down, so “the Fed won’t be processing new grants,” Schlissel said.

“All the time, grants are ending and new ones are starting,” he added, a process that the government shutdown will delay.

International students who need to renew their visas to continue attending Brown next semester should be able to do so. Because the State Department charges to process visa and passport applications, that procedure will not be affected by the shutdown, Politico reported.

 

State struggles 

The shutdown caused more immediate consequences across the state, though Wyss said as long as the government reopens soon, the effects on its economic recovery should be limited. About 7,000 Rhode Islanders work for the federal government, making it the state’s third largest employer, according to the office of Sen. Sheldon Whitehouse, D-R.I.

Whitehouse told reporters Monday that Congress has about a week to pass a resolution funding the government or the state’s economy will suffer substantive damage, the Providence Journal reported.

“This is a cumulative harm. It takes a lot of liquidity out of the economy and it takes a lot of money out of the economy,” Whitehouse told the Journal Monday. “Even people who are not directly affected by it will see an economic slowdown, which is something obviously Rhode Island can ill afford now.”

The state relies on federal funds for a variety of valuable activities, Wyss said. If that money does not come through, projects will have to be halted, employees will not be paid and the recovery will slow, he added.

For example, the Small Business Administration, which was responsible for more than $85 million in loans last year, has to cease giving out loans during a shutdown.

Though Congress usually authorizes funds to pay federal employees in full for the time they did not work while the government is shut down, “most Americans are one month away — one paycheck away — from defaulting on a loan payment,” Wyss said.

The 21-day government shutdown of 1996-7 was the longest in history, but “the economy was doing well, so the effects were limited,” Wyss said.

Typically, the federal government itself incurs the largest cost from a government shutdown, Wyss said. Every day it remains closed, the federal government loses about $100 million, he said. When those employees who were furloughed return to work, they usually require overtime to catch up on everything they missed while out, he added.

 

Political instability 

In the days leading up to the government shutdown, Republicans and Democrats in Congress fought over whether a final budget deal would either delay or repeal the Affordable Care Act, also known as Obamacare. Democrats, including President Obama, insisted the fight over the health care law, passed in 2010, constituted a separate debate and should not be part of budget negotiations.

Rhode Island’s congressional delegation echoed Obama’s sentiments.

“The writing has long been on the wall that the extreme ideological agenda of House Republicans to delay or defund health reform is a dead end. The fight over the Affordable Care Act was settled, both in the Supreme Court and in the 2012 election, and yet this futile discussion continues all the way to a government shutdown,” wrote Rep. Jim Langevin, D-R.I., in a statement.

Rep. Steven King, R-Iowa, explained his party’s motivation for attempting to repeal the Affordable Care Act on the grounds that “we can recover from a political squabble, but we can never recover from Obamacare.”

  • flyhighwithsky

    How is it, every news story you read starts out with “Shutdown could harm state economy” and ends up with, we could not find any negative consequences to the shut down?

    The shutdown could just as easily cure cancer, why isn’t that the headline?