Washington area could lose $200 million a day if shutdown occurs, economist says
By Brigid Schulte and Justin Jouvenal,
The Washington region, home to the largest concentration of federal workers and contractors in the nation, could lose an estimated $200 million a day and could see more than 700,000 jobs take a financial hit if the federal government shuts down Monday night, according to a local economist’s projections.
And that’s not counting the blow to tourism, one of the region’s economic mainstays, if the Smithsonian museums, the National Zoo, Civil War battlefields and other federally funded attractions are shuttered, said Stephen Fuller, director of George Mason University’s Center for Regional Analysis.
“This is serious,” Fuller said. “The national economy may not notice a shutdown much unless it lasts three or four weeks. But for the Washington area, this is a tsunami.”
In addition to the economic impact, area residents could also see cuts in federal services: no new applications for benefits such as Medicare, Social Security and child-care subsidies, no new housing or small-business loans, no new clinical trials for research funded by the National Institutes of Health and a murky prognosis for the safety net for those most in need.
Child-care centers in federal agencies would close, parents said, and child-care workers, who are not employed by the federal government, likewise would be sent home.
Mail will continue to be delivered, as the U.S. Postal Service is an independent agency. Amtrak officials have said trains will continue to run.
And while the District is the only jurisdiction that could have basic services — such as trash pickup and libraries — halted, Mayor Vincent C. Gray (D) is attempting to avoid that by declaring every city employee essential, a distinction that could keep them working through a federal shutdown.
Del. Eleanor Holmes Norton (D) has been pushing a bill in Congress to exempt the city from a potential shutdown, as it did in 1995, when a federal shutdown had what Norton called a “disastrous” impact on the District.
“It was horrific,” Norton said. “In a shutdown, the garbage does not get picked up, no matter what, for a week. Then you can declare a health emergency.”
‘We’re really bleeding’
The possible shutdown comes at a time when the region’s economy is weak, said Fuller, the economist. The across-the-board sequestration cuts earlier this year cost the region 26,500 net jobs in August, Fuller said. With furloughs and agencies not filling positions, the $42 billion annual federal payroll is down $2 billion from last year, and federal contracting is down $5 billion.
“We’re really bleeding,” Fuller said. “A shutdown will have real costs.”
Fuller, who made his calculations over the weekend thinking that a shutdown would be inevitable, projected that 60 percent of the area’s 377,000 federal workers would be deemed “nonessential” and would stay home.
Likewise, he projected that the shutdown would affect about 20 percent of the government’s contractors, who receive about $75 billion a year from the federal government. And each person furloughed means less money spent at local businesses or vendors, he said.
Rep. Gerald E. Connolly (D-Va.) said a shutdown would have a disproportionate effect on the Washington region, where the federal government’s presence accounts for one-third of the economy.
In 1995 and 1996 — when a political impasse between President Bill Clinton and a Republican-controlled House led by Speaker Newt Gingrich resulted in the shutdown of the federal government for three weeks — several appropriations bills had already passed. This time, not a single appropriations bill has made it through Congress, so a shutdown could affect every federal agency in some way.
Air traffic controllers are considered essential, so planes will fly. But without “nonessential” support staff, those planes could be delayed. Federal benefits may continue to be processed, but with fewer workers to process them, no new applications would be accepted and “serious backlogs” would be expected.
Lawmakers passed legislation to continue paying active military members, but veterans’ benefits could run out if a shutdown lasts more than a few weeks, administration officials have said.
Widespread ripple effects
“The ripple effects of a shutdown can be devastating,” Connolly said. “A federal pullback may mean the difference for state and local governments on whether they can continue Meals on Wheels or hire an additional police officer or do more emergency preparedness training. All of this stuff is under the radar, but it’s very critical to the health of our communities.”
Rep. Frank R. Wolf (R-Va.) is concerned about how a shutdown could affect the FBI, the Drug Enforcement Administration, the CIA, the U.S. Marshals Service and other agencies, many of whose employees live in the area. “Congressman Wolf has been saying for weeks that shutting down the government is not a good idea,” said Daniel Scandling, a spokesman for Wolf.
The Congressional Research Service, in a recent report, said the 1996 federal government shutdowns shuttered national parks and monuments, stopped the processing of passport applications and the visa applications of foreigners, halted new patient enrollments in clinical trials at the NIH, and delayed work on bankruptcy and delinquent child-support cases.
In 2011, the federal judiciary estimated that it could operate courts for two weeks after a shutdown but that “serious disruptions” would follow.
The D.C. region could be hit hard by lost income tax revenue from tens of thousands of idled federal workers: Maryland officials estimate the state would lose $5 million a day. Prince George’s County officials say they could lose $270,000 in income tax revenue daily during a shutdown.
To stave off such effects, local governments have been setting aside pots of money in anticipation of a shutdown. Montgomery County accounted for a possible $60 million loss in revenue in its current budget. Arlington County set aside $3 million, and Fairfax County has $8 million. Maryland and Virginia officials say they are looking at the possibility of tapping reserve funds.