US Capital Area Braces for Economic Hit From Government Shutdown

(Bloomberg) — The Washington, DC region is bracing for disruption to the local economy when federal funding lapses at midnight on Sept. 30, forcing a US government shutdown.

Some 440,000 people work for the federal government in the District of Columbia and its Virginia and Maryland suburbs, out of a total workforce in the metro region of 3.34 million.   Government contractors and small-business owners are also poised take a hit as offices shutter and families cut back on spending.

“These federal workers are people who have to pay day-care bills, who have to pay mortgage and rent, who have to pay for food,” said District of Columbia Councilmember Robert White. “And when they’re not getting paychecks, their families suffer. When people are not going into the office, the city’s revenue declines.”

The last — and longest on record — government shutdown occurred in late 2018 and early 2019. During the 35-day impasse, Washington lost roughly $47 million in revenue, according to local lawmakers.

This time, the looming shutdown places extra strain on federal workers who are still hurting from inflation, which remains elevated despite two years of interest-rate increases by the Federal Reserve. Many Americans also face the prospect of a resumption of government-issued student loan payments next month.

Agencies from the Department of Labor to the Department of Housing and Urban Development are poised to cut back on some work and put other projects on hold. Most national parks and museums including the Smithsonian and National Gallery of Art could also close, impacting tourism spending.

In addition to the hit to local businesses, a short standoff will result in increased unemployment insurance claims across the region and could delay access to food and nutrition programs, like the Special Supplemental Program for Women, Infants and Children.

“Federal employees and every single American who depends on the government for vital programs and services deserve better from our elected leaders,” said Everett Kelley, president of American Federation of Government Employees.

One sector that is expected to take the brunt of the impact is federal law enforcement, whose employees will be required to work without pay. The DC Metro system will experience reduced ridership, city leaders said. And there are roughly 11,000 active-duty military service members in the district who won’t be paid under a government shutdown, according to the White House.

A longer standoff could have an even more wide-ranging impact for Washington, as well as the rest of the US. The District of Columbia is unique in that it requires congressional approval for its budget each fiscal year.

In preparation, Democratic Representative Eleanor Holmes Norton has included a provision in the appropriations bill to ensure that the local government would remain open during a shutdown. Still, some local leaders say the possibility of relying on Congress to fund the city unnerves them.

“Every shutdown has been different, and so it’s always a concern whether or not the district will be able to spend its own money depending on how long the federal government is shut down,” White said.

The district has previously provided loans to assist with mortgage and rent payments, local leaders said. Another long-term shutdown could prompt similar action.

“Many households are already rent-challenged, and a prolonged lack of income could lead to homelessness,” Councilmember Anita Bonds said. “We are already taking a bit longer to bounce back from the pandemic, so this shutdown could really hurt our recovery.

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