Have You or Someone You Know…Been Affected by the Government Shutdown?

October 12, 2013

Chances are your answer to this question is a rather emphatic YES!  Personally, I know several people who have been directly impacted and think the whole situation is shameful.  I know people who have been dedicated Government civil servants for over 20 years and have applied for unemployment to help them make ends meet.   There may be some who read this blog who may not have much exposure to these oft beleaguered servants and may have a slightly cynical view of our country’s public servants.  While there may be a kernel of truth to the common joke about civil servants who are “retired in place” (not so fondly referred to as RIP), this can also be said of every industry and field across the country. They are the ones who unfortunately cause the public to doubt the abilities and effectiveness of all civil servants.  I have known and worked beside so many civil service employees who were highly educated, extremely talented and 100% dedicated to helping our wonderful country; they are true patriots.

I don’t normally get involved in political issues, and, in fact, I generally shy away from them in business – and try to do so (somewhat unsuccessfully) with family, too!  So, why am I choosing to write about it now—other than the obvious fact that it’s a hot topic today?  We have all heard through the media about the far-reaching impact of the furlough. I agree it is much more extensive than causing civil servants to be on mandatory time off without pay.  It impacts a significant amount of the big Government contractors who work in a supporting role for the Government or provide expertise not readily available within the civil service or military workforce.

Another sector of business that is often overlooked in these discussions is that of the small business world.  These are the small businesses who may be participating in programs such as the Small Business Administration (SBA) 8a program for small disadvantaged businesses, or small businesses who augment the large prime contractors to the Government by subcontracting to them.  The trickle-down economics of this shutdown impacts the small business world.  Specifically, in the words of the Professional Association of Small Business Accountants’ recent blog, “Government contracts and no payments means employees with little or no work are still taxing small business payroll without any return on that investment.  While the shutdown may only last for a few weeks, that lost revenue can impact a small business for months or even years to come. Most small businesses have two to three weeks of additional revenue on hand.”

This is a very real concern of many small businesses who generally have limited working capital.  With the reduction of revenue, but continuing personnel expenses, many small businesses may have to turn to working capital loans to make ends meet in the short term.  The rates and availability of funding from the SBA, who is also adversely impacted by the shutdown, will continue to pose challenges.  If you wish to read more about the impact on small businesses, you can find it at the following link.  http://www.smallbizaccountants.com/how-the-government-shutdown-is-hurting-small-business

Another issue that seems to come up often in discussion is whether the Government is really going to default on their loans.  If we listen to the media, we would all believe default is imminent.  I believe we all need to remember this is a political issue first and foremost.  A recent quote by Douglas Cote, chief investment strategist at ING U.S. Investment Management, sums this up simply, yet eloquently. “This is a manufactured political crisis, and because of that, it is incumbent on investors to look past this and to the true fundamentals that drive markets.”

Now, this doesn’t mean I think we should all close our eyes and click our heels together three times believing everything will go back to normal.  I would like to see more fiscal responsibility by our Federal Government, more bipartisanship from our politicians, and the American people to “hang in there” while we continue to demand more from our politicians and Government.  I think we can all agree to one thing when it comes to the Government shutdown: there is little, if any, positive aspect to it.

I’ll leave you with a final thought from Thomas Jefferson.

“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.” ¬Thomas Jefferson