The Economic Impact Of A Government Shutdown

Sep 27, 2013

We’ve been hearing this week about the federal budget crisis in Washington. So far, the focus has been on members of Congress and their political battles.

But if Congress can’t agree on a way to fund government when the new fiscal year begins on Tuesday, then the spotlight could shift over to the economic bystanders.

Those are the innocent workers and business owners who stand to lose from any disruption in government.

NPR senior business editor Marilyn Geewax joins us to talk about the potential economic impact of a government shutdown.


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And the economic stakes all of these are very high. Let's turn now to Marilyn Geewax. She's in the studio here with us, senior editor with NPR. Marilyn, welcome back.

MARILYN GEEWAX, BYLINE: Hi. Good to be here.

HOBSON: Well, what are you going to be looking for as possible economic effects if there is no deal in Washington?

GEEWAX: The - this whole situation brings about a lot of uncertainty, and that's one thing that most people hate, when you're dealing with business. Whether you're a worker, whether you're a store owner, you don't like this level of uncertainty. And right now, we have 2.6 million federal workers who stand to lose paychecks. Now, those, of course, the majority will be deemed essentially. That is they're involved in protecting property, protecting lives, so FBI agents won't be affected.

But there are at least 800,000 that could get laid off and get no paychecks. And there are also an awful lot of people who are active military. And the Pentagon has said the active military people will have to stay on duty but they may not get paid. Well, you know, if you're a grocery store owner, you don't want to see 800,000 federal workers not get a paycheck, two million service member families that aren't going to have a paycheck. That's a real problem for spending.

HOBSON: There's also the issue of the national parks, right, and tourism.

GEEWAX: And tourism could take a big hit. Consider if you owned a restaurant. I talked to a guy who owned a restaurant out - just outside of the Shenandoah National Park in Virginia. Early October is the leaf peeping season. That's when people are out there, driving around. If the National Park is closed, the Skyline Drive is closed, that's a real hit on all of that tourism industry out there. So restaurant owners worry, stores worry and, you know, the entire really travel industry is concerned because passports won't get processed.

So people may not plan various trips. So we're not really talking about an airport shutdown. Air traffic controllers will be deemed essential. TSA workers, they'll be essential. But it's all the things around traveling. Yes, the airport may be open, but if Yosemite Park is closed, what's the point of going on your vacation?

HOBSON: What about the IRS?

GEEWAX: That's another thing. You know, if you filed back in April for an extension, the extensions are - on filing your annual taxes, it comes due October 15th. So you may be trying to finish up your taxes. You have a question for the IRS. Hurry up and call them today because they may not be there on Tuesday when you have a question. So there are lots of little things like that and some big things for the economy.

How about home loans? The FHA signs off guaranteeing home loans. What if your deal doesn't close before Tuesday and the FHA workers are not there? There are lots of business implications when you have government just slowing down like this and paperwork piling up. And that's just in a very short run. If this goes on over a long period of time, there are lots of contractors who are - let's say you've got - the airport is open because the controllers are in the tower. But you can't finish building the runway extension that has been planned for a long time. I mean, all of these things start to snowball. Where contractors are affected, workers are affected. Consumer confidence unravels. None of this is good for the economy.

HOBSON: And, of course, this all comes back to the issue of uncertainty for business. You know, if you're sitting there, waiting to perhaps hire somebody for a position, are you really going to hire them right now when you don't know if the government is going to be funded? Lots of questions, not a lot of answers unfortunately right now about what's happening in Washington. Marilyn Geewax, senior business editor at NPR, thank you so much as always.

GEEWAX: Oh, you're welcome.

HOBSON: And we'll be back in a minute. HERE AND NOW. Transcript provided by NPR, Copyright NPR.