Sky wouldn’t fall under a U.S. gov’t shutdown

Carleton prof figures congressional spat unlikely to be noticed by most Canadians

I don’t know any serious scholars who’d consider the debt ceiling as an important accountability measure.

If the U.S. Congress can’t make an agreement on raising its debt ceiling, Canadians shouldn’t worry about how it might affect their travels down south — unless they’re trying to visit a museum or national park.

“It’s much ado about nothing,” said Carleton University business professor Ian Lee.

The debt ceiling is a limit on how much money the U.S. government can borrow, and a new ceiling gets agreed upon whenever Congress is approaching that limit. If the limit is reached, Congress cannot borrow any more money and can only spend the revenue it collects, which triggers a shutdown in the federal government. It also means the U.S. cannot pay its foreign debt.

Because shutdowns are rare and never last more than a few days, Lee said the only real impact Canadians would feel is if they were travelling to the U.S. and were hoping to visit a national park or museum, which would be closed as part of the shutdown. (The last shutdown was in 2013, and lasted 16 days.)

“I imagine some presidential libraries may also shut down,” he said. Access to federal services would likely be closed, but state and municipal services would be running normally.

Lee, a former BMO banker, has studied the impact of government shutdowns in the past and isn’t worried about the potential impact in Canada.

Although it’s common for the debt ceiling to be raised without any trouble, it’s become a recent tactic of political parties to use the debt ceiling as leverage to pass or block certain policies, effectively threatening a government shutdown if they don’t get what they want.

The Republicans did this against former president Barack Obama with the aim of quashing the Affordable Care Act in 2013. Now, Democrats are thinking of doing the same to block border security budget increases and shield the Deferred Action for Childhood Arrivals program — a provision that protects 700,000 undocumented immigrants who came to the States as children — which U.S. President Donald Trump plans to rescind.

While a government shutdown sounds dramatic, Lee said a delay in raising the debt ceiling wouldn’t have a significant impact on the U.S. economy. For one, essential services like border security and key parts of the Pentagon would be exempt from a shutdown, as would entitlements such as Medicaid and Social Security, which are automatically funded.

A long-term shutdown would force the U.S. to default on its foreign debt, and its credit rating and dollar would plummet, but Lee said “the political pressures, the economic pressures, are so enormous to pass the bill” to raise the debt ceiling that the likelihood of a shutdown lasting long enough to cause real damage is extremely low. Congress would be forced to end its game of chicken once investors started to panic.

The U.S. is the only G7 country to have a debt ceiling, and its purpose is to ensure accountability in government, although Lee said the mechanism is “long obsolete.”

“I don’t know any serious scholars who’d consider the debt ceiling as an important accountability measure,” he said.

Lee said transparency and thorough, accurate reports from the government and independent organizations are far more important.

The Canadian government releases an annual budget through the Finance Department, which gets tabled in Parliament and is updated in the fall. The Office of the Auditor General also evaluates government spending and publishes its reports. The Parliamentary Budget Office, too, releases reports and analyses on government spending, as do many national banks and NGOs.

“We’ve developed a much more sophisticated system” than the debt ceiling, said Lee, who noted the U.S. government also has similar checks and balances.