11 Ways The Tea Party-Inspired Government Shutdown Will Hurt the Economy

Ed note: At about 9:30pm Eastern on Thursday, the president announced that a deal had yet to be reached with the House Republicans. As such, a government shutdown continues to loom.


The White House made yet another effort to broker a deal to prevent a government shutdown Wednedsay night, with President Obama saying that a shutdown would be “inexcusable.” Even though Democrats have agreed to the initial House Republican position of roughly $30 billion in cuts from 2010′s funding level, House Republicans are still holding out for deeper spending cuts and various policy riders demanded by the Tea Party, such as cuts to funding for Planned Parenthood.

Senate Majority Leader Harry Reid (D-NV) said on Thursday that “the two sides have essentially agreed on the amount of money set to be cut from the long-term budget but that Republicans have drawn a line in the sand over ‘ideology.’” As Steve Benen noted, “what we’re talking about here is Republicans shutting down the government over access to contraception and family planning services.”

If the government shuts down on Friday night, all government functions deemed “non-essential” will be stopped in their tracks. But “non-essential” describes a wide variety of important government functions, which, if they stop, threaten to harm the nation’s fragile economy. Here are some of the economic consequences that will occur under a Tea-party inspired government shutdown:

SLOWER ECONOMIC GROWTH: According to analysts at Goldman Sachs, a shutdown “could shave 0.2 percent off the growth of Gross Domestic Product for every week it continued.”

HOUSING MARKET THREATENED: During a shutdown, the Federal Housing Administration, “which insures and guarantees a large number of single-family mortgages and even more rental and multifamily properties,” would cease operations, blocking home loan and insurance applications.

BLOCKED TAX REFUNDS: A shutdown would “delay $42.1 billion of refunds to about 14 million U.S. taxpayers,” the majority of whom are middle-class or low-income.

INCREASED DEFICITS: By increasing the costs of funding the debt, a shutdown could actually increase the federal deficit.

SMALL BUSINESS LOANS BLOCKED: During the shutdown, the Small Business Administration’s processing of loan applications is halted. The SBA approves about $50 million in small business loans per day.

INSIDER TRADING INVESTIGATIONS HALTED: At the Securities and Exchange Commission, the shutdown would stop most investigatory activities, “including routine sweeps and examinations of investment advisers and broker-dealers and most work on in-progress enforcement cases.”

SOCIAL SECURITY ENROLLMENTS SLOWED: While Social Security checks still go out during a shutdown, applications for new enrollment will be processed more slowly and “a huge backlog of applications for Social Security disability benefits would grow even larger.”

WORKPLACE SAFETY INSPECTIONS STOPPED: At the Occupational Safety and Health Administration, which polices workplace regulations, only “‘imminent dangers’ to life or property could be investigated,” leaving 95 percent of workplace complaints unanswered.

TOURIST INDUSTRY AROUND NATIONAL PARKS HURT: National parks close during a shutdown, while “tourists spend about $32 million a day in the communities just outside the parks,” according to the National Park Service.

800,000 FEDERAL WORKERS FURLOUGHED: A shutdown would force the furlough of about 800,000 federal employees, and “leave the Treasury owing them $174 million a day in back wages.”

STATE BUDGET WOES EXACERBATED: If a shutdown occurs, “the federal money that helps states pay the administrative costs of their stretched unemployment programs could dry up, forcing states to advance the money to keep the programs running.”

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