Government Shutdown Impact

As the government approaches its September 30th deadline to approve funding and avoid another spending lapse, it is important to consider the impact that a shutdown has on the country. With the triumvirate of politics, partisanship, and posturing rearing their ugly heads, the reality of regular government shutdowns remains on the horizon.

Financial Impact: An Estimated $4 Billion Loss

A recent report found that the federal government wasted nearly $4B over the last three government shutdowns, including $3.7B that went to federal employees who received back pay while not working. Agencies spent an additional $338 million on lost revenue, late fees on interest payments, and administrative work. These figures in the Senate report were relatively conservative and incomplete as Agriculture, Commerce, Defense, and the Justice departments were unable to provide data. These numbers only represent one piece of the financial losses.

As someone who lives in Washington D.C., I witnessed the impact that shutdowns and furloughs had on local industry. It seemed like every week another batch of restaurants closed and stores near government agencies went out of business as furloughed employees tightened their wallets. The hospitality industry as well as the restaurant industry suffered as there were less attendees at conferences (or conferences and events were canceled), fewer people were visiting for government events, and employees were no longer in the office to visit their favorite restaurant or post work hangout. My barber near Capitol Hill jumped out of his seat incredulously when I walked in and he shared that I was the first customer that he had in weeks. Uber drivers told me that their number of trips (and income) precipitously declined during this stretch.

Government shutdowns hit far more than just furloughed employees. Consultants and contractors also were hit hard by the shutdown. Firms that had forecasted revenue and had hired people to serve on certain contracts suddenly found themselves furloughing or laying off employees. Work delivery suffered as uncertainty bred contingency plans, starting and stopping work led to more re-work, and delayed contracts disrupted activities and expectations. This $4B loss does not include the residual impact. The Congressional Budget Office found that the shutdown led to nearly $11B in lost economic activity.

Declining Service

There were also many “lost productivity costs.” For example:

  • The Federal Trades Commission identified a fraudulent immigration related scam during the shutdown, but was unable to notify consumers and implement action against this scam.
  • The Consumer Product Safety Commission was unable to recall potentially dangerous products during the shutdown.
  • Smithsonian Institution facilities close during the shutdown, leading to an estimated $4.3 million loss in revenue and 1.1 million people being unable to visit.
  • Grants were delayed or not dispersed during this time, causing nonprofits to have to tap into funding reserves (if they had enough available), or stop service.

Halting or limiting service can erode trust in government institutions, services, and adversely impacts citizens.

Lower Morale

The three shutdowns totaled 52 days over the last six years. During these shutdowns, federal workers spent nearly 15 million days on furlough, amounting to 57,000 years of lost productivity. Uncertainty around when your next paycheck will come breeds fear. Fractured government erodes trust. A vicious human capital downward spiral occurs. Hiring for critical positions is delayed, apprehension leads to attrition of vital personnel, and a whole generation of prospective federal employees turn their back on the government as a potential career path. Those who were fortunate to not be furloughed during this time were frustrated by work stoppages, dependencies on personnel who may have been furloughed, and the polarizing and demoralizing water cooler debates.

Senator Tom Carper (Democrat- Delaware) states, “Government shutdowns are avoidable failures of governance that hemorrhage taxpayer dollars, put our nation’s federal agencies in organizational and financial disarray, and pose risks to our national security. The impacts can be felt in every corner of our country, in red states and blue states alike.” Consider the wide-ranging impact of these shutdowns and that these shutdowns are not just isolated to Washington D.C. or the government. They impact businesses, services we depend on, and the livelihood of countless people trying to support families. As another potential shutdown looms, continue to watch the discussions and debates on government funding and whether Congress should pass legislation that would automatically initiate a continuing resolution (CR) whenever lawmakers fail to enact appropriations.

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Evan Piekara

With over twelve years of experience consulting and working in the government and nonprofit sectors. Evan started his nonprofit career as a member of Teach For America (TFA), where he served as a teacher, volunteer, and in operational support and training roles for the organization. He has supported BDO Public Sector in the launch of their management consulting practice and has provided strategy and operations, human capital, and information technology support to government and nonprofit clients. At BDO Public Sector, Evan led efforts building internal practice recruiting processes including interview questions, cases, and candidate evaluation criteria and developed their Graduate Advisor internship program.