Some Impacts of the Government Shutdown

The ongoing government shutdown has been a great source of debate within the country and a great dissatisfaction for the nation's elected representatives, Congress.  This shutdown has had negative impacts on various stakeholders, whether directly or indirectly.  For example, furloughed governmental employees and military personnel have been obviously been affected, yet certain businesses that rely on governmental land or operations have also been impacted.  An article entitled “Shutdown Costs at $1.6 Billion With $160 Million Each Day” discusses, among other things, an individual business’s loss in revenues due to the Grand Canyon being shut down.  This business provides guided raft tours down the Colorado River (through the Grand Canyon) and has lost an estimated $80,000 in revenues from just one week.  Unfortunately, this loss of revenue will not be reimbursed (unlike some of the government furloughs) once the shutdown is over.  If the shutdown continues, then the firm will have a more difficult time covering its fixed costs and could eventually leave the industry.  There are surely many other examples of private, small firms that have been negative externalities of the government shutdown.

The shutdown has also impacted consumer expectations for the future.  Another article entitled “Economic Confidence Plummets as Gov't Shutdown Begins” discusses the plummeting economic confidence, which is based on two important components: first, one’s individual assessment of the current economy, and second, which direction the individual feels the economy is headed.  The plummet in consumer confidence implies that consumers have a bleak assessment for the current and/or future of the economy. This impacts current consumer purchasing trends.  In this case, consumers are likely to save more of their discretionary income and spend less.  The author of the article suggests that the direction of economic confidence will reverse and improve once the government shutdown is resolved.  However, If the shutdown is not resolved, then consumer purchases will continue to drop, which will continue to decrease demand of normal goods and hurt sellers of products and services, especially luxury goods.