Senate Minority Leader Chuck Schumer (D-N.Y.) made a last-minute deal with Republicans to re-open the government on Monday, the third day of the government shutdown. The deal only lasts through February 8, so another shutdown is possible — perhaps even likely. The government may not shut down in February, but if it does shut down again, Americans should know what to expect.
Five days after the 2013 shutdown, Moody’s Analytics reported that the shutdown cost the economy about $20 billion, 0.5 percent of GDP.
A future shutdown will likely have a broad impact — but it won’t hit Americans where they might expect.
For instance, the local Department of Motor Vehicles would still be open. If you need to update your driver’s license — or check out a library book — any federal shutdown won’t make an impact. These are mostly state bodies, so a federal shutdown has no effect on them.
Many government benefits, like Social Security checks and food stamps, will also continue without interruption. If you want to get a mortgage, however…
A government shutdown means parts of major federal agencies, like the Internal Revenue Service, will temporarily close. But the IRS’s closure doesn’t automatically mark a national holiday.
As NBC5 reported, the IRS is vital for checking Social Security numbers and income for would-be homeowners seeking a mortgage. Kelly Decker, with First United Bank Mortgage, explained that banks use the IRS in the lone process, especially for first-time home buyers.
“It’s going to take a little longer to get those loans funded. So if they had planned on moving trucks showing up on the last day of the month, it might mean they have to wait maybe another three, four, five days, depending on how long the shutdown takes,” Decker told NBC5.
This could mean people selling their homes might reject a first-time home buyer in favor of someone who has cash.
The IRS stall might also delay the pay boost promised by the Republican tax bill signed at the end of last year. Some of the IRS’s 45,500 employees were set to make sure that lower income taxes in the bill would have immediate impacts for February paychecks. While the January shutdown has ended, if the IRS doesn’t finish this work in time, a February shutdown could stall the benefits of tax reform.
A future shutdown will also likely cause delays to the approval of new foods and other consumable goods through the Food and Drug Administration (FDA), and stall environmental cleanup from the Environmental Protection Agency (EPA).
In 2013, the shutdown delayed 1.2 million IRS identity verification requests and stalled approvals from the FDA in moving products to market.
Americans might struggle with diseases like the flu under a future shutdown. Programs in the Center for Disease Control and Prevention (CDC), like the flu vaccination program, would be be disrupted as about half of the 80,000 Department of Health and Human Services (HHS) employees go on furlough.
Civilian employees at military bases will also be furloughed. About 500 civilian staff at Ellsworth Air Force Base in South Dakota were sent home over the weekend during the brief January shutdown.
Any shutdown would also affect federally run monuments and parks, although many of these would remain open, just without staff. The Statue of Liberty on Ellis Island remained closed over the weekend, but New York’s governor, Andrew Cuomo, announced Sunday that the state would pay wages for the federal workers.
Any shutdown will cost the federal government a great deal. In 2013, up to 850,000 workers were furloughed each day — but those salaries were eventually paid for workers who did not work and government had to pay interest on late payments.
According to a report from the Office of Management and Budget (OMB), the 2013 shutdown cost the government $2.5 billion in compensation costs for furloughed workers, $11 million in National Parks and Smithsonian Institution revenue, and $500 million in consumer spending at the National Parks.
The private sector also lost out — OMB estimated that there were 120,000 fewer private sector jobs created in the first half of October.
Labyrinth Game Shop, a popular business right on Capitol Hill in Washington, D.C., posted a message to customers, encouraging them to avoid a government shutdown.
“If you have anything to do with the Senate, for small businesses everywhere, but especially in DC, I beg you to please avoid a government shut down. The last time this happened it was the worst month in terms of sales that we’ve ever had, ever, in 7 years,” the shop posted on Facebook.
If you have anything to do with the Senate, for small businesses everywhere, but especially in DC, I beg you to please…
“It’s a hit, but it’s a digestable hit,” Mark Zandi, chief economist for Moody’s Analytics, told CNN Money. “The economy is so strong right now, it’d take a lot to derail it.”
“The dollars and cents of federal spending matter, but [the problem] was really the impact on confidence due to the uncertainty,” Zandi explained. A long shutdown might slow the current economic boom driving the stock market to new records. Even so, the government will likely reopen, making any uncertainty rather short-lived.
Most of the nearly 2 million federal workers whose paychecks will be halted have been deemed essential, CNN Money reported. Air traffic controllers, TSA agents, prison guards, FBI agents, and members of the military will all continue to work — without pay, during a shutdown. They will all receive backpay if the future shutdown continues to their next pay day.
All those workers not getting paid will cost local economies — restaurants, shops, and various businesses. In the Washington, D.C. area, where businesses pay high rent and often operate on slim margins, even a brief shutdown could prove devastating to small businesses. Enterprising entrepreneurs should consider starting new businesses or expanding their current businesses into D.C. if a future shutdown goes on long enough.
If you’re a new home buyer, a small business owner in the D.C. area, a business launching a new food item, or an employee who will get a pay bump from the GOP tax bill, a shutdown will hit you hardest. Otherwise, the impact may go largely unnoticed, besides a general distrust of those causing the shutdown in Washington.
There’s reason to believe the Democrats were more to blame for the recent one, and indeed it ended after Schumer announced he had made a deal.