5 Ways the Shutdown Pain Could Get Much Worse

5 Ways the Shutdown Pain Could Get Much Worse


Now in its third week, the shutdown will become the longest in history if it lasts until Saturday, and the negative effects are starting to accumulate – and could grow more destructive in the coming days. New York’s Jonathan Chait says that the longer the shutdown lasts, the worse it gets: “The reality is that the effects of a shutdown compound over time. Government agencies can creatively stretch their budgets to mask gaps in funding, but at some point, their capacity to maintain services snaps. The relationship between the length of a shutdown and its impact is not linear. A 30-day shutdown is not ten times as damaging as a three-day shutdown. It is probably 100 times as damaging.”

Thousands of federal contractors are already feeling the pinch. According to Bloomberg’s Christopher Flavelle and Paul Murphy, contractors could see more than $200 million per day in lost or delayed revenue due to the shutdown. Not all contractors are suffering equally, though, since they vary considerably in size and include defense giants such as Boeing and General Dynamics that can more readily weather the storm. But cash flow problems could mean layoffs at smaller contractors. Alan Chvotkin of the Professional Services Council told Bloomberg, “Now you’ve got a group of employees who are on a time-and-material contract, or a cost-reimbursement contract, and they’re not working. So now the company has to decide whether to pay those employees out of whatever revenue they might have available to them.”

Here are some of the other problems that could crop up over the next few days and weeks if the shutdown continues:

1) Missed paychecks: About 800,000 federal workers who are either furloughed or required to work as “essential” employees will not receive paychecks this Friday (January 11). Although they will likely be paid eventually, the lack of income is creating financial crises for thousands of workers. According to Zillow research, federal employees who are not being paid owe more than $438 million in rent and mortgage payments in January. In addition, thousands of federal contract employees who are not working as a result of the shutdown are unlikely to ever recover lost pay. (More at CNBC.)

2) Evictions and mortgage delays: Thousands of tenants who rely on Housing and Urban Development programs to help pay their rents are facing potential eviction due to the shutdown. HUD, where about 95 percent of employees are on furlough, sent letters to roughly 1,500 landlords last week asking them not to initiate eviction proceedings. In addition, the Federal Housing Administration is not accepting applications for some kinds of mortgage insurance, and a shortage of employees at the IRS could cause delays in income verification for borrowers applying for mortgages. (More at Curbed.)

3) No food stamps: Funding for the Department of Agriculture’s Supplemental Nutrition Assistance Program runs out at the end of January, and the program’s reserve funds are insufficient to cover all of February’s payments. About 38 million people receive SNAP benefits at a monthly cost of roughly $4.7 billion. (More at The Washington Post.)

4) Airport headaches: A higher-than-usual number of the 51,000 Transportation Security Administration employees who screen air passengers have reportedly been calling in sick, although the agency has denied there’s a problem. The longer the shutdowns last, the more likely staffing could become an issue for passengers. Air traffic controllers are also working without pay, although there have been no reports yet of absent workers. (More at NBC News.)

5) Tax refund delays: Although the IRS announced last year that it would not issue tax refunds in the event of a shutdown, The Wall Street Journal’s Richard Rubin and Peter Nicholas reported that the Trump administration said Monday that it will send out refund checks if the shutdown continues. There is some uncertainty, however, about the administration’s legal authority to do so, which would require bringing back furloughed workers. (Only 12.5 percent of IRS’s 80,000 employees are currently working.) Politico’s Brian Faler reported Monday that the Treasury Department is still looking into whether it has the authority to issue refund checks, with an announcement expected later this week. (More at The Wall Street Journal and Politico.)