"The Impact Will Multiply": Government Shutdown Aftershocks Are Hitting The U.S. Economy

The effects of the government shutdown are starting to reach their way across various industries and affecting the U.S. economy. As Bloomberg reports, some examples include airlines that can't get permission to add new planes and mortgage lenders who are unable to verify income for borrowers. Worse, breweries can’t sell new beer while they’re waiting for approval of new labels.

This is just a small cross-section of the aftershocks occurring from shutting down nine major departments of the government.

Longtime congressional budget aide Stan Collender stated: "The impact will multiply as the days and weeks continue".

Friday marked the 14th day of the shutdown that is the consequence of President Trump not getting the funds he needs for his border wall. Despite a somewhat upbeat press conference that the president held Friday afternoon after meeting with Nancy Pelosi and Chuck Schumer, additional effects from the shutdown are still making their way across the broader economy.

In one example, Southwest Airlines said that the shutdown will likely delay its plans to expand service to Hawaii. Delta is unable to begin service with a new airliner, an Airbus SE A220. Not only are airliners having trouble adding new aircraft to their fleet, they're also having difficulty starting new pilot training programs. These tasks necessitate FAA approval, and most of the FAA's 5,000 employees aren't working. Air traffic controller training has been suspended as well, at a time when staffing for the position is at a 30 year low.

Meanwhile, homebuyers and lenders are also feeling the sting of the shutdown. Lenders rely on IRS income verification, which has gone dark as a result of the shutdown, delaying mortgage approvals across the nation. The IRS has said it is "barred" from this type of paperwork until a spending deal happens. Pete Mills, senior vice president of policy at the Mortgage Bankers Association says that if the delay goes on another week, "it's going to delay closings". 

As we reported overnight, the IRS will also be unable to process tax refunds during the shutdown. 

Government reviews of foreign investment decisions and mergers have also been affected: the expected approval of mergers like T-Mobile’s bid for Sprint Corp still hangs in the balance, awaiting the nod from the FCC. 

Just as troubling, arguably, is the fact that brewers will have to wait to offer new beers. The Alcohol and Tobacco Tax and Trade Bureau, which received about 200,000 new requests for alcohol labels, has been shut down. Pot smokers may also find that their mellow has been harshed - medical marijuana company Nutritional High International told investors that some of its protections against Federal prosecution may also have slipped away temporarily as a result of the shutdown. 

The SEC has also been reduced to just 275 key employees, tasked with monitoring trading. The agency has put a halt on opening new investigations into misconduct and isn't approving new plans for IPOs and ETFs. If the shutdown continues, planned IPOs like Lyft and Uber could be delayed. 

The Fish and Wildlife Service has halted analysis of Dominion Energy Inc.’s $7 billion Atlantic Coast pipeline and The State Department's review of TransCanada's Keystone XL pipeline has also been delayed. Additionally, the shutdown of the Environmental Protection Agency, Interior Department and Council on Environmental Quality - agencies often tasked with analyzing numerous government actions - could create delays in other departments. 

Ann Navaro, a Bracewell LLP partner who previously worked at the Department of the Interior stated: “With the broad shutdown at all of those agencies, certainly there is plenty of NEPA work that has slowed or been halted, and it will affect the timing of decisions. If the shutdown continues into next week or longer, I would think we would start to see a pretty significant impact in terms of slowing analyses and other decisions.”

Even the coffee shops near government buildings are feeling the burn. Sam Samhouri, who owns a cafe that across the street from two federal buildings said business has fallen by 60% this week.

"All my customers aren’t working. Between the Democrats and Republicans, we are paying the price," he told Bloomberg

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