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April 11, 2011

Professor Allen Schick: "Government Shutdowns – Uniquely American"

 Posted by Michel Lazare

As you know, a last-minute agreement on this year's budget among the leaders of the US Congress avoided a partial shutdown of the US Federal Government. Failing this budget agreement, a partial shutdown would have occurred at midnight on April 8 when the time-bound resolutions that had funded the Federal Government so far in this fiscal year would have expired.

Such possible partial shutdowns are "uniquely American," as Professor Allen Schick explains in the interview he gave a few days ago to Marco Werman, the anchor of the National Public Radio show "The World."

Disclosure: as Marco Werman indicates during the interview, Allen Schick has worked for the IMF's Fiscal affairs Department as a consultant. Even better, he is a very good friend of many contributors to our PFM Blog!


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Andersen, Lassen, and Nielsen (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1599437) analyze late budgets in the American states and find that changed fiscal circumstances (especially negative ones) and divided government are key predictors of the incidence of late budgets, as well as the degree of delay. Unfortunately, both circumstances are unlikely to change in the context of the US federal government in the near future. Moreover, the fact that Congress is still discussing this year's budget while it should have long started to think about the next one does not bode well for the future. Congressional budgeting has broken down. My guess is that gridlock is here to stay for the medium term. The institutional solutions that Prof. Schick mentions exist in some countries and states - more favorable reversionary provisions that keep government going in cases of delayed approval. However, the very politicians who fail to agree annual budgets would have to agree such new rules for the US federal government, and this seems unlikely in the current political climate.

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