Closure comes at the worst time for the economy

Companies warn investors that the shutdown, which has been going on for almost a month, has drastically reduced revenues that they would never recover like the $ 25 million lost by Delta Airlines. because of fewer reservations than expected in February.

"I do not think it's an impact of people who miss paychecks," says Lawrence Yun, chief economist at the National Association of Realtors. . "It's more about making people feel more uncertain about the direction of the economy, this perception that there is chaos in Washington."

In response to a survey conducted by the association last week, 25% of real estate agents said the government's closure had deterred their clients. to buy houses, either because of delays in obtaining funding through non-operational government agencies, or because of general concerns about the economic environment. According to Mr. Yun, 2% of buyers have always left the market, but this time it expects losses to be higher, while purchases have already been depressed by rising interest rates and weakness. stocks.

to prevent late payments from resulting in lost sales, some companies offer low-cost financing programs to federal employees, relying on the payment of their income in a few weeks.

Some car dealerships in the hard-hit area of ​​Washington DC, for example example, let their government customers pay later for service work.

"We have already experienced this before, and everyone knows that they will eventually be compensated," says John O Donnell, president of Washington Area New Auto. Merchants Association. "We are dealing with a delayed cash flow problem."

In previous closures, most of the lost economic activity is generally reversed in the following quarter. But at some point, a pause in the federal government's activity that began during the already sleepy vacation turns into an economic activity that America will never find again.

Take the thousands of federal sellers facing tough times if their contracts are not. and businesses that depend on federal workers at work.

In general, they do not benefit from the credit abstention programs that banks now offer to anyone with a federal identity card, which increases the chances that a credit card will The crisis is turning into a major crisis.

"It will be harder for them to extract concessions from their lenders," said Ian Shepherdson chief economist at Pantheon Macroeconomics. "If you fail, you will not be able to be resurrected, the longer the process lasts, the greater its potential becomes."

The other negative signs of the economy only exacerbate this effect, he added. "The moment is really terrible," Shepherdson said.

The White House estimates that late payments to federal contractors will result in $ 93 million a day in growth. This led the Council of Economic Advisers to double its calculations of the impact of the closure and to revise upward its projection of the latter from 0.1% every two weeks to 0.1% every week. .

Hassett stressed Tuesday in his phone conversation with reporters that there could be other revisions, as the closure has suspended the essential government services that companies must create, such as issuing new employer identification numbers.

"If this situation persists, data such as EIN numbers could have larger training effects than those observed in the data," Hassett said.

The absence of government programs to support economic growth will also have long-term repercussions.

Economic activity in rural areas, where Trump attempted to focus his energy, could be affected by the suspension of a $ 24 billion home loan guarantee program administered through the Ministry of Finance. Agriculture, a closed ministry.

"Lack of housing for workers is the main obstacle to economic development," said Bob Rapoza, executive secretary of the National Coalition for Rural Housing. "So, for the rural communities that are behind the 8-ball anyway, that just makes things worse."

Economists say that greater concern is not the immediate challenge of declining government activity, but what the political crisis says about Washington's ability to manage money. Other upcoming maturities, the approval of a new trade agreement with Mexico and Canada to raise the debt ceiling in March.

"If the government is divided and the growth weaker, companies have no reason to increase their spending". says Bernard Baumohl, chief economist at Economic Outlook Group, a private forecasting company. "If relations between the White House and the White House leadership and Democratic leaders get closer, it will have disastrous consequences for the economy in the months to come."