Money Matters: What a government shutdown means for personal finance

Education Resources, Finance 411,

As we write this column, Congress is on the precipice of allowing the federal government to shut down. It has happened 12 times since 1981, most recently for 16 days in 2013.

If it happens, many consumers’ personal finances would be impacted in a myriad of ways, and journalists will need to explain how.

If it doesn’t happen, bookmark this column and save it for the next time a shutdown occurs or seems probable.

Federal Employees

Those most directly affected would be “non-essential” federal government employees – essentially everyone except members of the military, law enforcement officers, some national security officials, air traffic controllers, VA health care workers, etc. – are furloughed without pay. In the most recent shutdowns, those workers received back pay once the government reopened, but there’s no guarantee in the law that such a retroactive payment of salaries will occur in this instance.

Some “non-essential” federal employees who work for entities with their own budgets separate from the full federal spending plan will continue to work, e.g., postal carriers and Amtrak employees. The workers who process social security, Medicare, Medicaid and food stamps will keep working. Federal courts will stay open, but since they are staffed by some “non-essential” federal workers, proceedings may very well be disrupted.

Everyone Else

If you use the last government shutdown as a guide, it’s reasonable to expect severe economic disruption, and disruption to many programs and services, as outlined in a 2013 report from the president’s Office of Management and Budget.

The [2013] Federal government shutdown:

  • Halted permitting and environmental and other reviews, delaying job-creating transportation and energy projects. For example, the Bureau of Land Management (BLM) was unable to process about 200 Applications for Permit to Drill, delaying energy development on Federal lands in North Dakota, Wyoming, Utah, and other states.
  • Hindered trade by putting import and export licenses and applications on hold. For example, because the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau was unable to issue export certificates for beer, wine, and distilled spirits, more than two million liters of U.S. products were left sitting at ports unable to ship.
  • Halted Federal loans to small businesses, homeowners, and housing and healthcare facility developers. The Small Business Administration (SBA) was unable to process about 700 applications for $140 million in small business loans, and the Federal Housing Administration (FHA) was unable to process over 500 applications for loans to develop, rehabilitate, or refinance around 80,000 multifamily rental units.
  • Delayed the Alaskan crab fishing season, costing fisherman thousands of dollars in lost revenue. Because the National Oceanic and Atmospheric Administration (NOAA) was unable to apportion harvest levels, the start of the season was delayed for three to four days. The fishing industry estimates these delays cost fisherman thousands of dollars of lost revenue per day, since days lost at the beginning of the season cannot be made up later.
  • Disrupted tourism and travel by closing national parks and the Smithsonian. The National Park Service (NPS) estimates that the shutdown led to over $500 million in lost visitor spending nationwide, a significant economic hit to communities surrounding national parks and monuments.
  • Significantly impacted small businesses that contract with the Federal government. Compared with the same period last year, small business contracts with the Department of Defense (DOD) dropped by almost one-third during the shutdown, and spending dropped 40 percent.
  • Delayed aircraft purchases and deliveries by closing the Federal Aviation Administration (FAA)’s Aircraft Registry. The General Aviation Manufacturers Association estimates that this delayed 156 aircraft deliveries valued at $1.9 billion.
  • Delayed Food and Drug Administration (FDA) approval of medical products, devices, and drugs. This delayed businesses in moving products to market. 
  • Deprived businesses of important information about the state of the economy. During the shutdown, Federal statistical agencies were unable to release data and reports ranging from the [monthly] jobs report and the Consumer Price Index to the Energy Information Administration’s reports on petroleum, diesel prices, heating oil, and natural gas storage. Businesses count on these data to make investment, pricing, and other decisions.
  • Stalled weekly progress in reducing the backlog of veterans’ disability claims, which was previously being reduced at a rate of almost 20,000 claims per week.
  • Delayed … tax refunds.
  • Prevented hundreds of patients from enrolling in National Institutes of Health (NIH) clinical trials.
  • Forced Head Start grantees serving nearly 6,300 children to close their centers … (before re-opening with the help of private philanthropists or their state).
  • Delayed home loan decisions for … rural families.
  • Led the FDA to delay … food and feed domestic inspections and … food safety inspections under State contracts. These routine inspections enable FDA to determine compliance with law and ensure that unsanitary conditions and practices that may result in foodborne illness are addressed.
  • Prevented the timely and complete investigation of … airplane accidents by the National Transportation Safety Board (NTSB).
  • Delayed workshops for … military service members to help them transition to civilian life and employment.
  • Forced cut-backs in Centers for Disease Control and Prevention (CDC) flu season surveillance and monitoring, leaving local public health authorities without access to complete national flu season data for two weeks.
  • Brought new Federal research activities to a standstill, with 98 percent of National Science Foundation (NSF), nearly three-quarters of NIH, and two-thirds of CDC employees furloughed.
  • Required the National Institutes of Standards and Technology (NIST) and the National Aeronautics and Space Administration (NASA) to furlough four out of the five Nobel Prize-winning researchers … employed by the Federal government.
  • Halted Environmental Protection Agency (EPA) inspections …, including hazardous waste facilities, chemical facilities, and drinking water systems.
  • Denied assistance to almost 500 small businesses seeking to keep their workplaces safe, because many States had to shut down the federally-funded Consultation Program.

Obviously, the severity of the disruptions this time will depend on how long the shutdown lasts. But as you can see from the list above, the number of personal finance story ideas is long – quite long indeed.

Weekly Money Matters personal finance content for your newsroom is sponsored by the National Endowment for Financial Education. Submit your story idea.