The nation has been gripped by a partial government shutdown with, at the writing of this article showed no end in sight. Government shutdowns are always about politics. This article is not about the politics of the shutdown, there are many articles on that. This article is about the economic impact. The reality is that a government shutdown impacts communities across America. It also impacts the thriving U.S. economy both in the short and long term. This article provides examples of the impact.
The Obvious Impact: Federal Government Workers
There is an oft-held belief that federal government workers are based in Washington D.C. and live lavishly. This is not accurate. The federal government has workers in all states and across the world. The shutdown means that workers from L.A. to Iowa to Alabama and parts in between will not be paid. While eventually they will get back pay, the reality is that many of them live from paycheck to paycheck and their bills must be paid now. For this article, I spoke to workers all across America who have expressed dismay over the fact that they are in many cases, delivering an honest day’s work but are getting no pay for it. One worker told me that she and her immediate family had to make decisions about whether to pay for medicine or food. I asked whether she could seek help from her family. She told me that she could not because the majority of her family worked for the Federal Government and were furloughed.
Failure to be able to pay their bills means that their credit will be impacted. In America, we live or die by credit ratings. Late payments have a major negative impact on us all. This is a reality that we cannot ignore. Regardless of politics, failure to get a paycheck for an honest day’s work stifles the economic engine that drives America. We are already in a significant deficit and the shutdown simply make that situation worse. While all sides stare each other down, the economy sputters.
Small Business Impact
Since the workers are not being paid, they will not have money to spend at the grocery stores, the coffee shops, the butcher shop and with the small businesses that drive the U.S. economy. For so many of the small businesses that have a very thin profit margin, to begin with, and they rely on the employees to keep them afloat. The longer the shutdown continues, the worse the impact. Consider that those small businesses also employ workers whose hours will be reduced because the business is not there. Recently, I visited a town in Florida where the majority of employees are federal government workers. On a typical day, the breakfast and lunch crowds would fill the town square. Ms. Emily the owner of the local eatery employs 10 people who cook the food, serve the food and clean up the place. During the shutdown, the square resembled a ghost town. Miss Emily had to reduce the number of workers to 3 including her, her son and one employee. The reality is that these workers have to use the money they would use for breakfast and lunch to feed their families, keep the lights on and pay the bills.
When we think of the economic impact of a shutdown, we must understand the direct and indirect impact on the economy. Sure, once this is resolved, money will flow again. However, the negative impact is likely causing long term damage to the economy. For example, will the workers think more closely about saving in the event that a shutdown occurs again and spend less on the businesses that they patronize? Will some of the small businesses be able to survive the shutdown? A shutdown does not simply have a temporary impact. It has a long-lasting economic impact that is largely ignored by media and politicians. It can and does alter significantly, the local, regional and national economy in sometimes permanent ways that are not considered seriously by those we elect. We have to ask ourselves, whether the negative and long-lasting effects on our lives is acceptable. If we decide that it is not, then what are we willing to do to make sure that we are not pawns in a political fight?
The damage to the economy is a sign of a larger and systemic problem: The budget process is broken, and taxpayers are paying the costs. When Congress is constantly budgeting by crisis, it erodes oversight and leads to wasteful spending. Citizens should demand that Congress not only make the budget process better but also ensure a sustainable budget future. If citizens fail to do so, we will continue to endure long term economic impact by the persons who we elect to secure our budget future. Abdicating that responsibility provides immediate risks to our lifestyles and long-term risks to economic viability. We can no longer continue to live in government by economic hostage taking.