Effects of the federal government shutdown may be slow in rippling to the Upstate – but wait and see, experts warn
The first week of the government shutdown didn’t inflict much pain on the Upstate, but it was enough to have the business community rethinking its ties to the feds. There are many such ties, but they vary in how obvious they are and how long it will take before we notice the severance.
The Congressional Research Office (CRO) issued a report on the causes, processes and effects of government shutdowns two weeks ago after shutdown threats became a negotiating tactic for those in Congress who want to defund the Affordable Care Act (ACA). The report highlighted areas of concern based on an assessment of past shutdowns.
A shutdown is essentially a funding gap that occurs when Congress fails to approve a budget. According to the CRO report, “six fairly lengthy funding gaps” occurred between fiscal year 1977 and fiscal year 1980, lasting from eight to 17 days. In the following decade and a half up to fiscal year 1995, nine funding gaps occurred, lasting three days or fewer.
Most recently, a comparative whopper of a shutdown lasted for 21 days from December 1995 to January 1996. Among the impacts of that event were the loss of revenues from seven million national park visitors and $18 billion in contracts in the Washington, D.C., area.
The View From Here
In the first week of October 2013, alarm bells weren’t exactly ringing in the Upstate.
“There’s that feeling out there from some that ‘this doesn’t impact me,’” said Mark Cothran, vice president of public policy for the Upstate Chamber Coalition. Small businesses that don’t have government contracts or rely on Small Business Association (SBA) loans saw little reason to worry. Cothran said he had heard of business trips to Washington, D.C., that had been cancelled, but many people felt like they would be unscathed for the most part.
“Short term, it doesn’t affect them at all, but the longer it goes on, it’s going to impact them,” Cothran said.
What did bother people was a feeling that the shutdown only worsened a generally insecure economic climate characterized by slow recovery, a looming debt ceiling, and costs associated with ACA compliance.
“I think what it does from a business community side is create more uncertainty,” Cothran said. “At the end of the day to me that’s the biggest impact of any kind of a shutdown.”
Early Warnings
Some groups did feel the impact right away. For instance, anyone who applied for an SBA loan this month might find his or her plans stalled.
“From a small business perspective, SBA is shut down,” Cothran said, “so if you didn’t have an SBA loan application in by midnight Sept. 30, your application is in limbo until the shutdown is lifted.” He said there was a similar concern about development projects relying on certain tax credits.
However, the Clemson Regional Small Business Development Center (SBDC) remained open for business because it is staffed by state employees and had already spent its federal funding for the year.
Concerns in Biotech
The biotech sector had cause to pause.
Among one of the most thriving parts of the economy, biosciences are vulnerable to difficulties because of the huge amounts of government funding and regulation that are part of the work.
Wayne Roper, president of SCBIO, said proponents of the biomedical industry were concerned by slowdowns at the Food and Drug Administration (FDA) and the National Science Foundation, which affect the research-to-product pipeline. Roper said the National Institutes of Health (NIH) also had “a huge effect.”
The FDA was able to retain 55 percent of its personnel because of the income generated by user fees from companies developing products, he said. However, the shutdown left the agency unable to accept regulatory applications for work that would begin in 2014, or any of the fees related to it. That stalled projects slated to begin next year.
Nearly 1,000 clinical trials are currently recruiting in South Carolina, including medical devices in studies sponsored by St. Jude Medical and the Medical University of South Carolina.
“Congress needs to get this straight: Uncertainty and chaos kills investment, and that chokes off economic growth,” said Roper. “No budget battle can surmount an economy that won’t grow. So that means our startup companies may find it even harder to find funding because no one wants to risk their cash in this environment. Throwing off the moral imperative to govern will continue to hurt innocent people and cause untold consequences.”
Sure Signs
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Tourism dollars generated by national parks were under the clearest threat.
Cherokee County may lose up to 750 daily visitors to Cowpens National Battlefield, said Marion Edmonds, director of communication at the state Department of Parks, Recreation and Tourism. Thousands are drawn to the area this time of year by fall colors and football games at several Upstate colleges.
Jennifer Stilwell, chief marketing officer at VisitGreenvilleSC, said it would be impossible to tell until next month how Greenville-area tourism faired.
Interestingly, wedding planners and brides-to-be might have been the most keenly aware of the shutdown’s economic implications. Edmonds said he immediately began receiving “frantic” calls about nuptials scheduled on federal property.
That aspect hadn’t occurred to him. Then again, as he put it, “if you’re looking at several thousand dollars, it suddenly comes home that you can be at the mercy of things beyond your control.”
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UBJ’s tips for surviving a government shutdown, based on the findings of last month’s Congressional Research Office report.
Don’t get busted. If you do, hope that your trial in a federal court doesn’t occur during a shutdown. You may wind up with an unpaid jury, bringing a whole new spin to the idea of “Twelve Angry Men.”
Don’t get sick, veterans. Veterans’ services ranging from health and welfare to finance and travel were halted during the last big federal shutdown.
Don’t go bankrupt. With IRS operations on hold, work on more than 3,500 bankruptcy cases were suspended during the last big shutdown. But then, as now, taxes were still due.
Let it out. You’re in good company if you vent using social media. At one point last week, the Social Media Listening Center at Clemson University logged more than 7 million mentions related to the shutdown. “I have never seen sentiment this negative on a topic,” said Joseph Mazer, center director. However, he noted that comments used “a large amount of sarcasm and playful banter.”
