This Government Shutdown Actually Affects Normal People?

So by now you may have heard about the government shutting down.  Like most people, you probably think that it isn't going to really affect you, that this is just another example of a distant, ineffectual body politic squabbling with itself.  Life will go on as normal, and no one who isn't being directly furloughed will even notice.  That's the general feeling, anyhow.

We are now solidly a week into this problem, and for the most part, the world continues to turn as it did before.  Take a walk down Main Street, USA and you will still see people walking dogs, eating at restaurants, and shopping.  Nothing has changed, right?

Well, actually, wrong.  While the gears of the economy have not ground to a halt, this shut down is contributing to a pretty substantial slow down.  Let's think on a few things.

About 800,000 federal workers and contractors have been straight up shelved, told not to come to work because they can't get paid.

Assuming a very modest average salary for these people (let's say about $40,000 per year, to be very conservative), regular taxation and bi-weekly pay schedules, that would give us about a $1,250 paycheck.

So off the bat, that is a billion (with a 'B') dollars that won't be going into the economy next week.

But the much, much bigger issue comes from a general disconnect in terms of how the average American thinks about the budget and government spending.  We hear a lot about deficits and huge numbers that make it sound like those fat cats in Washington are literally just burning piles of freshly printed currency to keep warm.  The reality though, is that the deficit in Washington is money in the pockets of Americans.

Over $3.5 Trillion.  That was the 2012 budget.  Now, a bit of that went to paying the interest on government debt (a good thing), and a very small portion of it went to foreign aid of various types (questionable), but the majority of it goes to domestic programs, in agriculture, energy, education, infrastructure, etc..

Now, you can argue, correctly, that there is a lot of waste in government spending, but again, how we talk about "waste" is a big part of the problem.  You can say that the inefficiency in government contract sourcing means that they pay above-market rates for projects, and often be right, but that money doesn't disappear because it wasn't used in the most cost-effective way.  Here is an example:

Government spends $22.5 million for bridge repairs that should have only cost $18 million.  So where does that extra $4.5 million dollars go?  Based on the general conversation around budgets, it is "wasted."

Reality:

Extra $4k in overtime and holiday pay for construction workers who normally aren't supposed to put in for over 40 hrs a week to keep costs down for their employer, Dave's construction
     - They spend this money on shoes for their kids, a mortgage, gas, and maybe a few dinners out

Extra $800k for John's Concrete, who normally has to low-ball material costs in a tough market just to get contracts, hurting his margin
     - Not having to give a bottom-dollar quote allows Dave to also pay a fair price for his lime, stone, etc., sharing that money with his suppliers, who again spend that money down the line

Extra $20k for Steve the architect, who is going to finally get to put those new cabinets and floors into his kitchen
     - Meaning a bunch of that money is going to pay the woodworkers and wholesalers who fix
       kitchens...

You get the point.  Senators aren't just keeping all that money, it doesn't get shot into space or disappeared in an accounting trick.  That "waste" becomes walking around money for the average American.  Think of the government as a rich drunken sailor on a port call; it may not spend its money wisely, but when that ship pulls in, everyone in town knows that it's going to be a good week for business.

Too abstract?  How about this:

My company, like a lot of small businesses, relies on government contracts for a large portion of our revenue. 

Because of the shut down, contracts that were due to be renewed the first week of October, or new contracts that were about to be signed and processed, could not be finalized.  Our customer contacts in the government don't have the freedom to spend their budgets now.

This hurts our bottom line.  We are making less money as a company because of the shutdown, directly.

Moreover, we as employees, get compensated in large part based on the performance of the company, in the form of bonuses.  When the company does well. we get paid well.  When the company doesn't do well, our paychecks shrink.

This government shutdown is costing not just the collective taxpayers money, or costing just corporations money, it is costing regular people, who don't work for the government.


I don't work for the government, but the shutdown is affecting my paycheck.  In turn, I am not going out to eat as much, I am not buying the things I normally would, and I am not going to the movies.  In short, I, and millions like me, are not 'paying it forward,' as it were.  Consumer spending is still what drives the economy, and government spending is still a very large part of the liquidity that allows consumers to prosper.

Let's get this government open again, shall we?  I want to go back to supporting the economy.