Uncertainty Of Budget Battle Has A Big Impact On Business

As Congress continues negotiations on approving the federal budget with the threat of a government shutdown looming, CEOs following the saga are dealing with the one thing they dislike most—uncertainty. And things aren’t likely to get better anytime soon.

“A shutdown does have a direct negative effect on the economy that gets worse as time goes on,” Stan Collender, adjunct professor at the McCourt School of Public Policy at Georgetown University and author of “The Guide To The Federal Budget” told Chief Executive. “A typical CEO may not care that much about a typical two-day, three-day, one-week shutdown, but its effects multiply over time, directly. People get laid off, any work with the government basically stops, you can’t get your invoices paid, so there are a series of direct effects.”

The longer-lasting impact of the budget back-and-forth is more emotional and psychological, according to Collender, because it puts the disfunction of the federal government in the spotlight and leaves the public wondering if officials will ever be able to work together effectively.

“For a lot of people, a shutdown is a positive political event.” – Stan Collender

“If Congress and the President can’t agree on some basic, nuts-and-bolts housekeeping activities like passing appropriations to keep the government open, what happens when you’re asking them to make a major policy change?” Collender says.

With issues such as the Deferred Action for Childhood Arrivals (DACA) immigration program, military funding and the Children’s Health Insurance Program (CHIP) acting as pawns in the budget battle, business leaders have largely been left as observers to a broken process, which now appears to be almost entirely politically-driven.

But is there any end in sight for this game of political brinksmanship?

“This is the new normal,” Collender says. “Even if there’s a Democratic wave come November, it’s going to be a Democratic majority in one or both houses dealing with a Republican president at a time when compromise is considered collaborating with the enemy.”

And it should be noted that a government shutdown will almost certainly be leveraged by politicians on all sides and used as a political tool.

“For a lot of people, a shutdown is a positive political event,” Collender says. “If the government shuts down, everyone is going to blame everyone else and go back to their constituents and say, ‘see what I was willing to do for you?’ So, it’s not necessarily a negative, at least immediately. It will be a positive immediately and a negative long-term.”