How the US government shutdown is affecting Americans

Virtually every employee with the Secret Service involved in investigations, security and the protective division is required to work during the shutdown. But 6,000 of the organisation's roughly 7,000 employees will not be paid.
Virtually every employee with the Secret Service involved in investigations, security and the protective division is required to work during the shutdown. But 6,000 of the organisation's roughly 7,000 employees will not be paid.PHOTO: AFP

WASHINGTON (NYTIMES) - The effect of a partial government shutdown began to ripple across the United States economy as it stretched into Day 19 on Thursday (Jan 10), with mortgage applications delayed, public companies unable to get approval to raise capital and thousands of Secret Service agents expected to show up for work without pay.

President Donald Trump and congressional Democrats have made little progress in negotiations to end a shutdown that has affected about 800,000 federal workers, many of whom will miss their first pay cheque this week, and who owe a combined US$249 million (S$336 million) in monthly mortgage payments, according to online real estate firm Zillow.

The stand-off is beginning to inflict pain on Americans, whose lives are affected, in one way or another, by the federal government. It is already the second-longest shutdown in history, behind the one that started in December 1995 and lasted 21 days.

On Monday (Jan 7), the Trump administration moved to soften some of the blow - and prevent taxpayer outrage - by directing the Internal Revenue Service (IRS) to issue tax refunds during the shutdown, reversing previous policy.

While the decision will allow taxpayers to get their money, the IRS workers being called back from furlough to process those refunds will not be paid until the shutdown ends.

The effects of a prolonged shutdown have some Wall Street economists predicting a hit to the US economy.

Bank of America Merrill Lynch economists said on Monday that it had pushed them to downgrade their estimates for economic growth at the end of 2018 by a 10th of a per cent.

 
 
 
 

The ramifications of a prolonged shutdown are beginning to unnerve those both inside and outside the federal government.

Some private companies and charities that serve public employees are searching for ways to cushion the impact.

The effects extend from the President's inner circle, to Wall Street to farm country.

1. Secret Service agents left in the lurch

Virtually every employee with the Secret Service involved in investigations, security and the protective division, which protects Mr Trump and dozens of other current and former government officials and their families, is required to work during the shutdown.

And 6,000 of the organisation's roughly 7,000 employees will not be paid.

Secret Service agents are growing increasingly anxious and angry about the shutdown, according to several current and former agents.

The Secret Service protects 42 people associated with the Trump White House, 11 more than were given details during the Obama administration.

In August 2017, the agency's new director, Mr Randolph D. Alles, told an interviewer that the sprawling Trump entourage was putting unprecedented strains on his agents, in terms of staffing and budgeting.

"They are asking you to put your life on the line and not paying you - it's ridiculous," said Mr Donald Mihalek, 49, a 20-year Secret Service veteran whose own retirement paperwork has yet to be processed because of the shutdown.

"Morale is a serious issue," said Mr Mihalek, who served on the presidential detail during Mr George W. Bush's and Mr Barack Obama's administrations.

"This is an incredibly stressful job that requires your full attention, and if you are standing there thinking about your mortgage, or your credit card bills, or the fact that you are burning through your savings, you are distracted, you not able to give 100 per cent."

2. Financial enforcement suffers

The Securities and Exchange Commission (SEC) has come to a standstill with "only an extremely limited number of staff members available to respond to emergency situations", according to a shutdown plan posted on the commission's website.

The SEC has about 4,400 full-time employees and during the shutdown is operating with just a few hundred - most of those tasked "to protect life or property".

The constrained operations means pending investigations in securities violations have ground to a halt, and there is no one reviewing applications for company stock offerings to raise cash or consider merger and acquisition filings.

Defence and corporate lawyers said meetings with potential witnesses in pending investigations have been cancelled, and some companies seeking to raise cash through a stock offering are having to bide their time.

Staff lawyers at the SEC are largely prohibited from responding to e-mails seeking information or guidance.

In the past, the SEC had managed to keep operating during government shutdowns by shifting around money in its budget.

But the commission, which has been operating under a hiring freeze for more than a year, is not able to do that this time.

"When I was there, we always had money to be able to operate for a certain period of time," said Mr Andrew M. Calamari, a lawyer with Finn Dixon & Herling in Connecticut, who stepped down as the director of the SEC's New York office in October 2017.

"I was there for 17 years, and in my time, we had several shutdowns, and in each case, we continued to operate."

The SEC said in a statement that staff "continues to monitor the asset management space, track market activity and watch for systems issues or other events that could disrupt the fair and orderly operation of the securities markets".

The agency also said it had advised those making financial filings to request expedited action before the shutdown. But corporate America will now have to wait for the government to reopen in order to move ahead with things like initial public offerings and pending corporate mergers that need approvals from regulators.

3. A waiting game for businesses, from craft brewers to auto suppliers

As the effect moves well beyond the nation's capital, craft brewers cannot get approval from the Bureau of Alcohol, Tobacco, Firearms and Explosives for new beer labels. And the Commerce Department has stopped processing requests from auto suppliers and other manufacturing companies seeking an exemption from Mr Trump's metal tariffs, leaving them uncertain over the price they will need to pay for key materials this year.

Farmers who planned to apply for subsidies to help mitigate the effect of Mr Trump's trade war must wait to get paid until the Agriculture Department's Farm Service Agency offices reopen.

And in neighbourhoods across the country, as many as 39,000 federally backed mortgage applications may have already been delayed because of reduced staffing in federal agencies, according to Zillow estimates.

4. Non-profit organisations offer no-interest loans to tide over

Several non-profit organisations, including the Federal Law Enforcement Officers Association, are trying to aid Department of Homeland Security workers who need immediate help with a limited pool of cash and other resources, an officer with the group's charitable foundation said.

The Navy Federal Credit Union is offering no-interest loans to service members who face the prospect of missed pay cheques.

Financial services firm USAA, though, has drawn criticism from members of the Coast Guard for offering similar loans that charge interest.

5. Food benefits could run out by end-January

The biggest and most far-reaching effect of the shutdown looms on Feb 1. Trump administration officials say that funding for the Supplemental Nutrition Assistance Programme, or Snap, which provides food benefits for about 40 million people, will run out of cash by the end of the month.

The Agriculture Department has not made it clear how long it will be able to fund the programme, which costs about US$4.7 billion a month, but estimates by anti-hunger groups put the department's reserves at US$3 billion to US$5 billion, meaning funding is more likely to completely run out in February or March.

Other food assistance programmes are facing a more immediate cash crunch.

The Special Supplemental Nutrition Programme for Women, Infants and Children, known as WIC, has already been cut off, with state funds filling the gap as the shutdown drags on.

WIC provides aid to an additional seven million low-income Americans who are considered to be at "nutritional risk".