The (horrible) gift of government shutdowns?

The US government did not shut down in FY 2023. That is immensely unremarkable…

But, I had a social media memory pop up about the most recent shutdown in the US, so I’m going to write about them. It was the longest shutdown in US history: 35 days (December 22nd 2018 to January 25th 2019) because agreement could not be reached to fund a giant wall between the United States and Mexico. The federal government has had major shutdowns under each of its last three presidents, so it will probably happen again soon. *See the end of this post for a quick primer on how shutdowns occur.  

Flashback 10 years: I was in grad school during a sixteen-day shutdown in 2013 under President Obama and was deep in literature on the local impacts of EPA Superfund remediation. Several papers estimate the impact of cleanups on local housing markets (when they are discovered, housing prices fall; when they are cleaned, housing prices increase). I remember thinking, ‘WHAT A HORRIBLE GIFT a shutdown is researchers!’ Horrible because shutdowns are very costly (380,000 federal employees were furloughed due to the 2019 shutdown), but a gift because shutdowns may be a true, sharp, random shock to government programs that are uncorrelated with local characteristics. They hurt… but, they give us a good shot at some causal estimates of program impacts! 

But… thankfully… this line of research is pretty much a non-starter in environmental… I think. Today (2.9.2023) I searched “government shutdown” in JAERE, JEEM, REEP, and ERE and found 0 results of environmental econ papers that work with government shutdowns. And that may good news for society… because when shutdowns happen, the EPA mostly stays operational if it involves human health. The EPA actually regularly publishes a contingency plan for government shutdown. All cleanups underway (or site discoveries) that involve immediate harm to human health continue operation. Benign waste sites and work-in-progress at safe sites get halted.  

Good for society, bad for researchers. If a Superfund site does experience a shutdown pause, it’s likely becuase it is not a risk to human health… which means it is perhaps not located near a large population, and potentially correlated with other local characteristics. Darn… exogeneity ruined. 

There may be other interesting environmental questions to answer with shutdowns, however. For example, I found a paper by Todd Gabe in Applied Econ Letters estimating the impacts of shutdown-induced National Parks closures on local tourism and gate fees. Insofar as we don’t get to observe high quality counterfactual data in a world where massive national parks don’t exist, government shutdowns may provide us the opportunity to value the local impacts (hey, John! Talking about valuation over here!). 

**A quick primer: each year, congress has to pass twelve budget appropriations to fund crucial entities, like many of the EPAs activities. The twelve bills are consolidated into one large appropriations bill and usually passed at the end of the year. If congress can’t pass the bill, they can pass a “continuing resolution” which uses the previous year’s budget to fund activities until the new appropriations pass. If they can”t do either of those, the government shuts down until the appropriations pass. The BIG result is that many government programs come to a screeching halt.