Published
November 08, 2023
After passing two short-term stopgap spending measures ahead of Oct. 1 and Nov. 17 deadlines, if Congress cannot reach an agreement on government funding by January 19, 2024, a partial shutdown will occur. A full shutdown will occur if there is still no agreement by Feb. 2, 2024.
The last government shutdown, from December 2018 to January 2019, was a partial government shutdown that lasted for 35 days, and analysts estimate the shutdown reduced economic output by $11 billion in the following two quarters, including $3 billion the U.S. economy never regained.
During the 2018-2019 partial government shutdown, some federal agencies remained open because their funding was approved prior to the shutdown, like the Department of Health and Human Services (HHS). This allowed HHS to move forward with clinical trials even though many other parts of the government were closed. This year, Congress has not approved any of the 12 appropriations measures that fund government operations, so the impending shutdown would impact all federal departments and agencies.
The Chamber is providing more detail about the possible length of a shutdown and the implications for the business community and the economy so that our members can prepare accordingly. This is the time to prepare for a potential shutdown, and the information in this piece may be helpful to small businesses.
Small Businesses That Are Federal Contractors
If you are a prime contractor with the federal government, look closely at the language in your contract related to work stoppage. The federal government cannot award contracts, modify them, or exercise options during a government shutdown. However, the actual work is expected to continue unless the contracting officer terminates the contract or puts it on a stop-work status.
If you are a subcontractor, contact the prime contractor as soon as possible. Find out what happens during a shutdown, whether work should continue, and especially what happens to you and your team when the prime contractor receives a stop-work order.
You can find more information on steps federal contractors should take to prepare for a government shutdown here.
Do Federal Employees Get Paid During Shutdown?
While many essential services like issuing Social Security checks, defending our borders, and maintaining our global military presence continue, most of the 2 million military personnel and over 2 million civilian federal employees do not receive paychecks until after the government reopens. Not getting a paycheck has a ripple effect beyond families’ financial pressures to a drop in spending, especially in communities with a heavy military or federal government presence.
Unfortunately, the retroactive pay federal employees receive when government reopens does not apply to workers at federal contractors.
Impact to Capital Markets and Small Business Lending
Financial markets stay open, but processing of Small Business Administration (SBA) loans will slow.
If you have an SBA loan, your repayments are still due, and it is a good idea to contact your lending institution and ask how the government shutdown affects your loan (SBA loans are provided through private lenders).
SBA is likely to continue and issue disaster loans, since they did so during the 2018-2019 shutdown, but you should expect new EIDLs (Economic Injury Disaster Loans) to be slow going.
Air Travel
Traveling for work? Check your flight status more often than usual because of delays and changes that may occur due to limited federal staffing in air traffic control. Once you confirm flight times, be sure to get to the airport early because the Transit Security Administration (TSA) will be short-staffed, too.
Your Voice Matters
The only way to prevent a government shutdown is for lawmakers to come to an agreement. Chambers at a local, state, and federal level want to help tell your story and urge lawmakers to work to prevent a shutdown.
If you are willing to share how a government shutdown impacts your small business, please email us your experience to smallbusiness@uschamber.com.
Tom Sullivan is the Vice President for Small Business Policy at the U.S. Chamber of Commerce. He was furloughed for 21-days during his first job in Washington when the government shut down in 1995-1996.
More on shutdowns
About the authors
Thomas M. Sullivan
Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.
