Donald Trump

Government Shutdown Wreaks More Havoc the Longer It Continues

Experts warn that if the shutdown drags into February or beyond, as the president has suggested it could, the devastating impact would be widespread

Southwest Airlines' yearlong effort to launch affordable flights to Hawaii is stalled. Craft brewers haven't been able to ship their seasonal beers. Hundreds of federal rental assistance contracts with private landlords have expired, putting low-income families and seniors at risk of eviction. Across the country, thousands of unpaid government employees and contractors struggling to make ends meet are turning to food banks for assistance.

As the partial government shutdown moves through its fourth week with no end in sight, the economic blow is hitting not only federal workers but also business people, households and travelers across the country. And experts warn that if the shutdown drags into February or beyond, as the president has suggested it could, the devastating impact would be widespread. 

"We'll be in no man's land," Mark Zandi, chief economist at Moody's Analytics, told NBC News. 

Here is how the worsening damage could unfold: 

Food Insecurity
The U.S. Department of Agriculture said it can fund the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, through February. The agency announced last week that it would bankroll the $4.8 billion in benefits for 39 million people enrolled in SNAP, but with a catch: States must issue those payments on or before Jan. 20 and families must make those funds — about $250 per household — last through February, whether the government reopens or not. 

If the shutdown lasts until March, the USDA could be forced to dip into its reserves to help fund the program, and its $3 billion SNAP contingency fund won't cover a full month of benefits.

"If the shutdown continues and USDA determines it does not have the authority to extend SNAP in March without congressional action, many low-income households would be at risk of serious hunger and hardship," said Dottie Rosenbaum, senior fellow at the Center on Budget and Policy Priorities. "Emergency food assistance providers such as food banks and food pantries, as well as other local community service providers, would likely see dramatic increases in demand as families and individuals scrambled to fill the hole in their monthly food budgets."

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It's not just families enrolled in the program that would take a blow. Should SNAP benefits cease, Rosenbaum said the more than 250,000 supermarkets, grocery stores, and other retailers that participate in the program would see a substantial drop in SNAP redemptions, which in many cases constitute a significant share of their sales.

Eventually, non-food retailers will also feel the pinch. That's because SNAP frees up cash for low-income households to buy other basic essentials like diapers and clothing, boosting economic stimulus.  A 2010 USDA study found that every $1 in SNAP benefits generates $1.79 in economic activity.

Threats of Eviction
Since the shutdown began on Dec. 22, the Department of Housing and Urban Development has been unable to renew almost 700 rental assistance contracts, placing low-income seniors and families at risk of eviction, according to the National Low Income Housing Coalition (NLIHC).  

Another 450 Project-Based Rental Assistance contracts are slated to expire over the next two weeks, and an additional 550 won't be renewed should the shutdown continue through February, NLIHC President Diane Yentel said.

HUD Project-Based Rental Assistance Contract Expirations

Cumulative expirations December 2018 through February 2019.

Source: Here

Under the Section 8 housing voucher program, tenants pay 30 percent of their household income for rent and utilities while the federal government makes up the rest of the rent. The average annual income for these households is $13,000.  

The Washington Post reported HUD sent a letter to landlords earlier this month, instructing property owners to dip into their reserve accounts "to cover funding shortfalls" and keep tenants in their homes. 

But not all property owners have sufficient savings to dip into and need the rental revenue to pay their mortgages, insurance, property taxes and other operating expenses.

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A landlord in Arkansas came under fire this week over a letter sent to more than 1,200 tenants across her 50 apartment complexes throughout the state. The letter said that because of the government shutdown, tenants had until Jan. 20 to either pay their rents in full or leave.

"If the people can't pay their rent, I can't pay bills. If I don't get paid, I can't pay my people," Annette Cowen, a property manager in Arkansas, told KFSM-TV.

Arkansas Online reported that after media attention and calls to lawmakers to intervene, the USDA told Cowen the agency would finance the rental contracts through at least February and maybe longer.

"People are really scared about what will happen to them," Yentel told NBC in a phone interview.      

Landlords of America's poorest tenants won't be the only property owners concerned about whether they'll get the next rent payment. The General Services Administration, which leases more than 187 million square feet of space around the country on behalf of federal government agencies, could miss its January rent payments at thousands of properties if the shutdown continues into February. 

Joe Brennan, managing director of Government Investor Services at JLL, said in a phone interview it is unclear how widespread the ripple effect of a delinquent federal tenant would be. Investors in commercial real estate properties are not just developers, but include pension funds, collateralized debt obligation bonds and capital stocks. 

"This is uncharted territory," Brennan said. "The government has never missed rent payments before."

Nearly a million federal employees missed their first paycheck Friday as the ongoing government shutdown stretched into record-setting territory. NBC's Blayne Alexander reports.

The faith and credit of the U.S. government has historically made the investment low risk with competitive leases. If the once-reliable tenant misses several rent payments over the course of the shutdown, Brennan warned investors may label them "high risk," leading to higher rent prices paid for by American taxpayers.   

Private landlords leasing space to the government can’t evict their federal tenants over nonpayment. They also can’t fine the government over late payments without approval from their tenant. Their only recourse is fight it out in court, a long and expensive process, Brennan said.

Justice Delayed Is Justice Denied?
The government shutdown, meanwhile, is threatening to grind federal court cases to a halt after it runs out of money on Jan. 25. 

The Administrative Office of the U.S. Courts, which initially projected that funding would be exhausted by Jan. 18, revised its estimated outlook on Tuesday. The office said in a statement that the additional week of funding was mainly "attributed to aggressive efforts to reduce expenditures."  

Since the shutdown began, federal courts have continued to operate by using court fee balances and other "no-year" funds. Courts and federal public defender offices have delayed or deferred non-mission critical expenses, such as new hires, non-case related travel, and certain contracts as part of their cost-cutting efforts. Judiciary employees are reporting to work and currently are in full-pay status. 

But once existing funding runs out the courts will operate on an "essential work" basis. Individual courts are allowed to determine which staffers are deemed necessary. Some courts have already issued orders suspending or postponing civil cases in which the government is a party.

And while President Donald Trump claims the fight over funding for a wall is necessary to address border security, the shutdown is having an unintended consequence on his efforts to curb illegal immigration.

Between Dec. 24 and Jan. 11, 42,726 immigration court hearings were canceled due to the shutdown, congesting an already backlogged system, according to a report from the Transactional Records Access Clearinghouse at Syracuse University. Another 20,000 scheduled cases will be canceled by the end of this week and as many as 100,000 hearings will be pushed back indefinitely by the end of the month if the shutdown continues.

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Ashley Tabaddor, president of the National Association of Immigration Judges, said in an interview with NPR that she now has around 2,000 immigration cases before her court in Los Angeles. And some judges, according to Tabaddor, have upwards of 4,000. The cases are booked years in advance and rescheduling them will be a logistical nightmare.   

"We don’t have time to adequately consider the cases that we do have, much less have to spend extra time to think about what we’re going to do with all the cases that have to be rescheduled," she told NPR.

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Safety Risks
The Food and Drug Administration announced Monday it would resume inspections of some of the riskiest foods such as cheeses, produce and infant formula as early as Tuesday. The routine inspections had been briefly halted as a result of the partial government shutdown.

FDA Commissioner Scott Gottlieb told NBC News his staff put calls out to furloughed workers to gauge whether they would come back to work despite not getting paychecks. 

"We got an overwhelming response from our very dedicated and mission-driven field force who are coming back to work unpaid," he said.

Riskier foods account for about a third of the agency's roughly 8,400 routine inspections each year.

Meanwhile, applications for new drugs have been halted. The FDA review of a life-saving peanut allergy treatment for children ages 4 to 17 is on hold due to the government shutdown. The California-based biotech company Aimmune Therapeutics said in an SEC regulatory filing that the FDA is unable to begin review of AR101, its experimental treatment for peanut allergies, due to the shutdown. A spokeswoman for the company told NBC that the FDA will initiate review of AR10 once "the lapse in appropriations has ended." 

As the government shutdown drags on, companies, restaurants and service providers across the country are coming up with ways to help the estimated 800,000 Americans not getting paid. NBC's Dan Scheneman reports.

However, Aimmune could see further delays even after the government has re-opened. Gottlieb warned in a tweet on Jan. 5 that the FDA is running out of user fees, which are paid by the companies and used to fund the regulatory review of drugs. The money was diverted to fund safety inspections during the shutdown.  He wrote on Twitter that review program will run out of money in early February. 

The shutdown has halted inspection of chemical factories, power plants, oil refineries, water treatment plants, and thousands of other industrial sites for pollution violations, The New York Times reported.

It has also suspended federal cleanups at Superfund sites around the nation and forced the cancellation of public hearings, deepening the mistrust and resentment of surrounding residents who feel people in power long ago abandoned them to live among the toxic residue of the country's factories and mines.

Houston, We Have a Problem
The effects of the shutdown are already rippling through aviation, with unpaid security screeners staying home, air-traffic controllers suing the government and safety inspectors off the job.

Transportation Security Administration (TSA) screeners who staff security checkpoints and air-traffic controllers are among the "essential" federal employees required to work through the shutdown without pay.

"I still have a mortgage to pay, I still have financial obligations — students loans — and those don't stop," Gerald Quaye, an air-traffic controller at New York's JFK airport, told NBC New York. "So, to come to work and not get paid and not know when I'm going to get my next paycheck, it's unsettling."   

It also has security repercussions. Mike Perrone, president of the Professional Aviation Safety Specialists union, said it's hard for TSA and FAA employees to "keep their head in the game" when they're worried about bills not getting paid. 

Many employees tell local media they can't afford to miss another paycheck. Industry officials worry that if the shutdown lingers and TSA employees quit en masse, with training for new hires on hold, the lack of staffing will lead to longer security lines, closed checkpoints, extended flight delays and even the grounding of flights.

"TSA only has what it has," said Christopher Bidwell, the vice president for security at the trade group Airports Council International-North America

Economic Damage Ripples
On Tuesday, Kevin Hassett, a top economist in the White House, acknowledged that the shutdown was weighing on the economy more than he had previously estimated. Hassett, chairman of the Council of Economic Advisers, said the White House now calculates that annual growth is slowing by about 0.1 percentage point a week.

Some companies are pointing to specific problems: Delta said Tuesday that the shutdown is costing it $25 million a month in government travel. Its CEO, Edward Bastian, said that with the FAA partially closed, Delta will also likely delay the start date of eight new aircraft.

Southwest Airlines told eager customers on social media that their long-awaited flights to Hawaii are on hold because they have not been able to complete the FAA’s certification process for extended over-water flights. The Dallas-based carrier had hoped to start selling tickets for service to service to Ellison Onizuka Kona International Airport on the Big Island, Lihue Airport on Kauai, Kahului Airport on Maui and Daniel K. Inouye International Airport on Oahu by late 2018, with flights debuting in early 2019, according the AP.

Bloomberg reports Fiat Chrysler Chief Executive Officer Mike Manley told attendees at the North American International Auto Show in Detroit that the new Dodge Ram 3500, which was unveiled Monday, could be delayed reaching the market because of the shutdown. Manley said the company is waiting on an emissions certificate from the EPA’s Office of Transportation and Air quality, and cannot sell the truck until that is approved.

The Securities and Exchange Commission, which oversees public stock offerings, is mostly closed because of the shutdown. As a result, some companies that had been planning initial public offerings in coming months, including Uber and Lyft, are likely facing delays. Marianne Lake, chief financial officer for JPMorgan Chase, said the bank could lose out on fees from IPOs and merger and acquisition deals that would be delayed if other shuttered agencies can't approve them.

U.S.-based breweries have become an unexpected casualty of the federal government shutdown. The federal Alcohol and Tobacco Tax and Trade Bureau, in charge of approving labels and license for any new beer, wine and spirits, has been impacted by the shutdown, and some breweries are now waiting for their new products to be approved.

The nation's craft beer taps are also being squeezed. The federal shutdown halted operations at the Alcohol and Tobacco Tax and Trade Bureau, which regulates alcohol production and distribution, preventing new breweries from opening and stopping shipments of some suds across state lines.

Brewers are increasingly nervous that they will lose money if brewery openings and seasonal beers are delayed much longer.

The end of the shutdown won't bring an immediate end to the delays. The longer the shutdown continues, the bigger the backlog the bureau will have to sort through when work resumes. That means it could still be months before labels and permits are approved.

"A big part of it will be all the plans that brewers have for 2019 will get thrown out the window," said Paul Gatza, director of the Brewers Association in Boulder, Colorado.

The Associated Press contributed to this report.

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