Late on Friday, we heard a brutally honest truth, attributed to senior Trump administration officials, about how unprepared we were for this unexpectedly long shutdown–and what that could mean for our economy and our counry.
Ironically, it came just hours after the Trump administration released some really great economic news: 312,000 new jobs in December. Those are fantastic numbers, but they’re pre-shutdown numbers.
And they only highlight how much we suddenly have to lose. Here’s the money quote, as reported late Friday by The Washington Post:
The Trump administration, which had not anticipated a long-term shutdown, recognized only this week the breadth of the potential impact, several senior administration officials said.
The officials said they were focused now on understanding the scope of the consequences and determining whether there is anything they can do to intervene.
By next weekend, the partial government shutdown will be the longest in U.S. history, and the “scope of the consequences” that the administration is now trying to understand suddenly seems quite severe.
Much of the problem comes from the fact that the government can’t pay and distribute literally hundreds of billions of dollars that are owed to Americans while it’s shut down. And that is likely to have a huge ripple effect on the economy. Here are a few examples.
$100 billion in tax refunds that won’t be issued on time
We start with the IRS, which cannot legally distribute people’s tax refunds during a shutdown. In any event, it’s super-understaffed (just 12 percent of IRS employees are working). Here are what the numbers looked like last year, according to The Wall Street Journal:
- February 2, 2018: $12.6 billion in refunds paid
- February 16, 2018: $101.2 billion in refunds paid
- March 30, 2018: $212 billion in refunds paid
None of that would get paid out under current plans. To put it in context, the dollar amounts here are roughly the annual economic output of entire cities, like Austin and Denver.
“That would hurt retailers that rely on consumers who file their taxes early and spend their refund money in February or March. And any such pullback in spending would weigh on the overall economy,” the AP reported.
Almost $5 billion in ‘food stamps’ won’t be paid
Next up is Supplemental Nutrition Assistance Program (SNAP). About 38 million Americans rely on SNAP, aka “food stamps” each month, but it’s no not funded in a shutdown.
January payments did go out, thanks to an emergency reserve. The government has enough left to afford about 63 percent of February’s tally. So, about $3 billon out of roughly $4.7 billion would be paid.
After that, if the shutdown lasts into March, the SNAP funds go to zero. While the total amount here is a lot less than the tax refunds, it’s extremely important to some people — and to businesses that rely on them as customers.
Maybe $5 billion a month in federal salaries
About 800,000 federal workers are either on unpaid furlough or working without pay. What’s the total impact?
In 2015, the average annual federal salary was $84,500. Multiply that by 800,000, divide it by 12 months, and I get about $5.6 billion per month.
In previous shutdowns, Congress ultimately authorized back pay, so let’s and assume that will happen here too. Meanwhile however, people can’t spend money in January and February if they don’t have it.
It has second and third order effects, too as businesses that count on these employees as customers also get paid less.
All the other government spending and its effects
My colleague Chris Matyszczyk wrote earlier about how the pilots’ union at Delta and United wrote to President Trump urging him to end the shutdown because it affects “the safety, security and efficiency” of the aviation industry.
Already we’re seeing TSA screeners, calling in sick rather than show up to work without pay. Beyond that, air traffic controllers, maintenance personnel and air marshals are not getting paid
Would you want to fly in a situation like that if you didn’t have to? What happens to the airlines, and to the businesses that rely on them? Pick an industry, the story is the similar.
This article isn’t about the border wall, and it’s not about which political side is at fault. You can blame whomever you like. But if the shutdown that nobody expected continues, it’s starting to look like it could well be brutal.