As the longest government shutdown in history continues, the impact is being felt beyond Washington, D.C. and the federal government’s 800,000 furloughed employees.
From small business owners to farmers to home buyers, we shine a spotlight on how the shutdown is affecting average Americans.
Federal Contractor Staff are Being Laid Off in their Thousands
The federal government is the largest buyer of goods and services in the world. Federal contractors and subcontractors provide these services, selling everything from office supplies to cleaning products, critical cybersecurity solutions to call center services.
Stopped contracts mean that contractors do not get paid and current estimates suggest that the shutdown is costing them $1.5 billion per week. This does not bode well for the millions of people employed by the contracting community. NextGov writes that “tens of thousands” of people are being laid off or furloughed, according to David Berteau, head of the Professional Services Council which represents the business community.
While larger contractors can shift employee resources to contracts that remain fully-funded, smaller contractors and sub-contractors don’t have that option. “We’ve heard from a number of companies facing a tough dilemma, ‘Do I get rid of employees and save money or get rid of money to save employees and go out of business?’” Berteau said. “If this continues a lot longer, we’ll see a lot of companies shut their doors because they don’t have a line of credit available.”
Farmers Miss Out on Critical Subsidies
After a challenging year of extreme weather and trade tariffs, America’s farmers are enduring another setback. Last summer, many farmers took advantage of subsidies from the U.S. government’s Farm Service Agency to offset the impact of the trade war, but others were unable to certify their crops (a crucial step in getting subsidies approved) before offices closed due to the shutdown.
Stuck without a subsidy check, many face cash flow issues, and even bankruptcy. “Younger farmers or not so well established farms are the ones that would be at the most peril,” Richard Wilkins, a farmer and president of the Delaware Farm Bureau told Delmarva Now (part of the USA Today network).
Over 300 Small Business Loans a Day Aren’t Being Processed
Small businesses are the lifeblood of the American economy creating 8.4 million net new jobs between 2000 and 2017, almost double that of large firms and compromising 99.9 percent of all firms (according to the SBA).
Small businesses depend on loans and other forms of credit to finance working capital, overcome cash flow gaps, and fund growth. Much of this financing comes from the U.S. Small Business Administration (SBA), which in 2017 fiscal year approved more than $30 billion through its 7(a) and 504 loan programs.
Beginning December 22, 2018, the SBA, which processes about 300 loan applications a day, halted its loan programs delaying small business owners from getting vital access to funding. As The Washington Post reports, many businesses have new growth plans for 2019. One such business owner is Brooks Troxler from North Carolina who applied for a $550,000 SBA-backed loan to purchase new commercial property.
Not only is the loan in question, but Troxler risks losing “…all the money he has sunk into appraisals, paperwork, fees and environmental assessments in the past few months to make this deal happen.”
Chairwoman of the House Committee, Nydia M. Velazquez (D-N.Y.) told The Washington Post that “the level of anxiety is unprecedented” and has urged the President to reopen SBA loan programs saying “the agency has to take proactive measures.”
The Economy as a Whole
Some predict the broader impact of the shutdown on the nation’s economy to be double that originally estimated by The White House, reducing economic growth by 0.13 percent for every week it lasts.
Business owners are warning investors that the shutdown has hit revenues and that they may never recoup them. For example, CNN reports that Delta Airlines lost $25 million in January due to fewer bookings.
General uncertainty about the direction of the economy is also putting off potential house buyers (home loan applications require a transcript of Form 4506-T to verify income from the IRS). Plus, rural areas could be further hit by the suspension of the U.S. Department of Agriculture’s $24 billion housing loan guarantee program.
Uncertain times have uncertain outcomes, and the full impacts of the shutdown remain unknown. One thing is certain, it’s not good for America’s workers or businesses.
Read on for tips to mitigate the shutdown’s impact:
Government Shutdowns: How to Prepare and Mitigate the Impact