Shutdown redux: (Borrowed) money to burn
If the 2013 government shutdown taught us anything, it's that the impact was felt way beyond federal agencies and their employees, says former DHS CHCO Jeff Neal.
This column was originally published on Jeff Neal’s blog, ChiefHRO.com, and was republished here with permission from the author.
Every time I think of the potential for a shutdown, some famous words from President Ronald Reagan come to mind. “There you go again … .”
A lot has been written about the 2013 shutdown. How it disrupted government services. How it wasted $24 billion and taxpayers got nothing in return. How federal employees were sent home to do nothing, not knowing if they would be paid. How in the end they got paid for doing nothing. How much stress employees, customers and taxpayers endured. How contractors had to lay off staff during the shutdown (most of whom got no back pay).
I almost expect to see Rod Serling step into the picture and start explaining how nothing is what it seems in the Twilight Zone of Washington, D.C. Sadly, there is no narrator and this is not a TV show. Shutdown planning has already started in every agency. Leaders are reviewing plans, updating the lists of exempt positions, and working with other agencies who may be affected if they shut down.
All of this planning costs money. There is a dollar cost and an opportunity cost. Time that is wasted on planning for another shutdown is never going to be recovered, yet no responsible agency can fail to plan for the consequences. They have the choice of being wasteful or irresponsible.
Pain for Everyone
Just like last time, government employees are not the only ones who can and will suffer in another shutdown. In fact, because government workers will most likely be paid for any time they do not work, they may be among the least harmed by a shutdown. Employees in the private sector are subject to far more losses. Here are a couple of examples:
Federal Contractors. Businesses have to earn revenue to pay employees. If they are told to stop work, the company’s revenue for that contract stops. Larger firms can absorb the impact for a few days, but not much longer. Small firms may not be able to absorb anything. If they lose the revenue, they have to immediately lay off employees. The government does not make the contractor whole after the shutdown and the employer does not make the employee whole. Everyone suffers and no one wins.
Businesses Other than Contractors. Walk into a restaurant near federal offices or military installations and take a look at the number of federal employees who are there. Go to the dry cleaners, the convenience stores and the coffee shops. They depend heavily on customers who work for the federal government, either as employees or contractors. When they are not at work, those businesses send employees home. They get no revenue and their employees get no pay. No one makes any of them whole.
The economic impact of a shutdown is immense. It is even more than the dollars wasted on paying employees ($2.5 billion in the 2013 shutdown) who are not allowed to come to work, the revenue businesses lose, and the wages their employees will not get paid. Here are just a few more examples from the 2013 shutdown:
- It 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.
- It 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 2 million liters of U.S. products were left sitting at ports unable to ship.
- It disrupted private-sector lending to individuals and small businesses. During the shutdown, banks and other lenders could not access government income and Social Security number verification services. Two weeks into the shutdown, the Internal Revenue Service (IRS) had an inventory of 1.2 million verification requests that could not be processed, potentially delaying approval of mortgages and other loans.
- It halted federal loans to small businesses, homeowners and housing and health care 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.
- It 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.
- It 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.
- It 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.
- It delayed aircraft purchases and deliveries by closing the Federal Aviation Administration’s (FAA) Aircraft Registry. The General Aviation Manufacturers Association estimates that this delayed 156 aircraft deliveries valued at $1.9 billion.
- It temporarily closed six Head Start grantees, serving nearly 6,300 children. Head start grantees operating in Alabama, Connecticut, Florida, Georgia, Mississippi and South Carolina closed for up to nine days before reopening with funds provided by philanthropists through the National Head Start Association or their state.
So — in addition to burning the government’s borrowed money, a shutdown will harm businesses large and small, take money out of the pockets of working men and women, reduce tax revenues, disrupt communities, and generally make a mess.
Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.
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