Soldiers Won’t Get Paid Under Government Shutdown, Medicare Payments Would Continue, Obama Administration Determines

By Fred Lucas | April 6, 2011 | 3:07 PM EDT

U.S. Army soldiers from the 6th Engineer Battalion 23rd Sapper Company gather during a briefing before going on a patrol in Kandahar on Sunday, July 18, 2010. (AP Photo/Rodrigo Abd)

( Soldiers will continue to earn money but not be paid during a government shutdown, a senior Obama administration official said.

“Military will continue to work as I described earlier,” the official said. “They will continue to earn money during this period of time. Given that we do not have any money to pay out, they will not be paid. They will not receive their paychecks until we have money again and Congress appropriates.”

The White House is preparing for a possible government shutdown by Friday, as the current continuing resolution that is keeping the government running in lieu of a 2011 budget, expires at the end of the week. The official told reporters that President Barack Obama hopes to avoid a shutdown, but that the White House has put a plan in place to prepare federal agencies for a shutdown.

House Republicans offered a continuing resolution that would fund the Department of Defense for the rest of fiscal year 2011, but fund the rest of the government for one week to give more time for negotiations and ensure the defense money is not cut off.

The continuing resolution would include $515.8 billion in base funding for the Department of Defense, a 2.9 percent reduction from the president’s fiscal year 2011 request, and a $7.6 billion, or 1.5 percent, increase over last year’s level, according to the House Appropriations Committee.

Further, the temporary funding bill would provide $157.8 billion for overseas operations and includes $126.4 billion for military personnel, providing for 1,432,400 active duty and 846,200 reserve troops.

Military personnel would be paid for the current pay period, but if a government shutdown extends beyond April 15, military paychecks would be impacted, but they would get backpay once military funding is restored, said Josh Holly, a spokesman for the House Armed Services Committee.

House Armed Services Committee Chairman Rep. Buck McKeon (R-Calif.) is working to ensure that military pay does not become a political bargaining chip, Holly said.

“They would get the pay. The problem is they wouldn't get it when they plan on getting it,” McKeon said in a press conference Monday. “I don't even want to contemplate that because to think we would have our young men and women over on the front lines putting their lives on the line with their families at home with bills to pay that don't get their paycheck – I just think that's really going too far. I think we are mature enough to get this thing fixed.”

In a background conference call with reporters Wednesday, the senior administration said Internal Revenue Service will stop processing tax refunds for tax forms filed by paper. However, electronic refunds will continue. Further, the administration official said that all tax audits will be suspended.

Meanwhile, if the government shuts down Medicare payments will continue, the Obama administration official affirmed, saying a government shutdown would have to go for an unusual long time for Medicare payments to stop.

“If shutdown went on a long time, for months, there would be no money to pay out,” the official said. “That is a hypothetical beyond the period any shutdown has lasted. Any reasonable period of time Medicare recipients should continue to receive benefits.” 

The administration official said that Small Business Administration loans will be suspended as well, which the official said would harm the economic recovery. Meanwhile, the number of Federal Housing Administration loans will be dramatically cut during the spring, which he said is usually the time most homes are purchased – thus further harming the housing market.

It has been 40 days since the House passed a budget with $61 billion in cuts. However, the Senate has yet to take action. Meanwhile, the Obama administration has made decisions on what is and is not an essential government service should a government shutdown occur, as seems more likely since both sides are not closer to an agreement.

The administration official explained that there are two categories of federal programs, which will not close during a shutdown. One category of programs operates on other funding such as user fees or donations, or get multi-year appropriations. The other programs in no danger of closing regard the safety of life and protection of property, such as the Department of Defense and the Department of Homeland Security.

Further, the National Institutes of Health will not continue with clinical trials.