July 11, 2011 – – St. Paul, Minnesota: If the outlines of a government shutdown are simple — politicians cannot agree on how
to spend money, so everything stops — the details are not. Minnesota officially closed its doors on July 1, as the state’s political leaders were required to settle on a budget for the fiscal year, which they could not.
With the broadest shutdown in state history entering its second full week and no sign of a compromise on the horizon, political leaders in Washington, facing their own standoff and looming deadline, may want to ponder Minnesota. The essential impasse sounds familiar: Republican lawmakers, who control St. Paul, want to rein in state spending and have rejected calls from Mark Dayton, the Democratic governor, to raise income taxes on the wealthiest Minnesotans.
Similarly, leaders in Washington disagree on what passing an August deadline without raising the debt ceiling would really mean, however, many experts say it could result in devastation to the nation’s ability to borrow and the overall economy. The U.S. government would have to pick and choose which programs are essential, just like Minnesota.
The costs of closing are quickly rising. For example: (1) The state had to pay the postage to send layoff warnings to 36,000 people, (2) The 22,000 workers who were ultimately sent home are expected to receive unemployment benefits, (3) The lost revenue on $1.3 million a day in lottery sales, (4) An unknown amount in parking and licensing fees, and (5) Approximately $52 million a month that the State Department of Revenue would ordinarily be bringing in if its compliance officers (now laid off) were scrutinizing tax payments; to name just a few.
Additionally, Fitch Ratings lowered the state’s bond rating, meaning that it will be more expensive for the state to borrow money.
The big lesson from Minnesota is that the unthinkable is possible. With a potential shut down of the U.S. Federal Government looming in a little over three weeks, there is a tendency to think it could never happen. Minnesota is proof that it can and it would be catastrophic for the United States and, potentially, for the world economic system.
The Master of Disaster