The Congressional Budget Office (CBO) estimates that the five-week-long government shutdown suspended $18 billion in government spending which include federal services. As a result of the shutdown, the gross domestic product (GDP) in the fourth quarter of 2018 was reduced by $3 billion or 0.2%.
The lingering effects of the shutdown may continue as President Trump’s approval to reopen the government is only “a temporary measure.” The situation creates uncertainty which both the market and the consumers do not like. The salaries paid to 800,000 federal workers are a big part of the economy. The loss of revenue from them has affected small businesses.
Many federal employees affected by the 35-day shutdown have used their credit cards to cover the lack of cash from their salaries. They will most likely reduce spending in the near term to have more cash on hand to pay the rent, mortgage, utility bills and other expenses in case of another shutdown.
Federal government suppliers also lost revenues as well as transportation services, airlines and hotels used by federal government workers.
Small businesses that were waiting for the approval for their SBA loan for their expansion may have to wait longer. So, even companies that don’t serve federal employees are also affected. Small businesses that go to the SBA for loans are usually those that might not otherwise qualify for commercial bank loans to get off the ground. They have no alternative sources of funds. Residual delays in federal government services caused by the shutdown may continue for some time. For now, affected businesses and the public will have to wait and see when the funding and spending that fuel small businesses all over the country will get back on track.