A University of Connecticut economist warned Monday that a shutdown of the federal government will have economic consequences in Connecticut including lost jobs.
Congress has until midnight Monday to reach an agreement to continue funding the U.S. Government. Averting a shutdown entirely seemed unlikely on Monday morning. On Sunday, House Republicans passed legislation linking government funding to a delay in the implementation of the Affordable Care Act. The Obamacare provisions are opposed by Democrats in the Senate.
With Congress seemingly at an impasse, Steven Lanza, editor of UConn’s quarterly state economic report, warned Monday about what’s in store for Connecticut if the government temporarily shuts down. The economist spoke at a press conference with U.S. Sen. Richard Blumenthal at Habco, the Glastonbury-based manufacturer.
Lanza said economists have predicted how government shutdown scenarios may affect the U.S. economy, and even the mildest impact will mean bad news for Connecticut. He said Moody’s Analytics has forecasted that a shutdown of just a couple days would have negative consequences on the state’s Gross Domestic Product.
“The consequences for Connecticut for just that 0.2 percentage point reduction in GDP would be a loss of 300 jobs and the associated incomes in Connecticut,” he said. “By loss I mean that the economy either would lose or simply not add 300 jobs it might otherwise have added . . . That translates into $13 million in lost income on an annual basis to households here in Connecticut.”
If the government were to stay shut down for three or four weeks, Lanza said it could cost 2,000 jobs in the state for a loss of more than $100 million in income over the course of a year, he said.
Blumenthal said he still had “a sliver of hope” that Congress could reach an agreement before the deadline and avoid a shutdown altogether.
“If calm minds and common sense prevail in bringing us together, there’s no question that a resolution can be passed by both houses of Congress that would continue government work in the service of the American people without the extortionist demands made by a small fringe group of extremists in the House of Representatives,” he said.
Even if a shutdown is avoided, Lanza said the last-minute funding — as well as the looming debate over raising the national debt ceiling — contribute to a sense of uncertainty that has hurt economy for years. He said “contractionary” government austerity policies and political squabbles over the budget have hurt national GDP growth, which has hurt the state economy.
“Connecticut would have by last year recovered all of the jobs that it lost in the recession,” he said.
Brian Montanari, CEO of Habco, said the uncertainty makes it difficult for his company to make business decisions. Habco makes ground support and test equipment for aircrafts. Although it has recently transitioned to working a higher percentage of commercial contracts, about half of Habco’s business is based on government contracts, he said.
Currently, the manufacturer employs 41 workers. Montanari said uncertainty over future contracts impacts hiring decisions.
“It’s something that keeps me awake at night,” he said. “. . . From an emotional perspective, when I’m making commitments to employees and I’m hiring, the last thing I want to do is hire, and turn around and have to contract.”
U.S. Sen. Chris Murphy, who will be presiding over the Senate for the vote Monday afternoon, said during a conference call with reporters on Monday that the Senate is expected to table the continuing resolution and return it to the House.
“The House of Representatives still has the ability to pass a clean continuing resolution and they should do it by the end of today,” Murphy said. “This is not about politics, as it seems to be for all these Tea Party Republicans. This is for the health of our economy.”
This also is about jobs. There are 9,000 federal employees in Connecticut and most of them will be out of work, Murphy said.
For example, there are civilian helicopter inspectors at Sikorsky who would be furloughed under a shutdown scenario.
“In the short-term that might not lead to layoffs, but that is going to compromise the bottom line,” he said.
In addition, new Social Security recipients will see their benefits delayed, and veterans who are in the claims process also will see their benefits delayed. Click here for a more comprehensive list of what would be impacted by the shutdown.
On a more personal level, Murphy said he is in the process of determining which personnel in his own office are essential and which would be furloughed if the government shuts down. He said it’s unclear at the moment if any of the staff would be paid for their time, but 17 years ago during the last government shutdown, Congressional staff was compensated.
“This is essentially just one big Republican Tea Party temper tantrum that they are having,” Murphy said. “I hope it’s not going to take a government shutdown for it to stop.”
He called the Republicans’ attempt to amend the continuing resolution with a delay of Obamacare a “fantasy.”
“Right now the healthcare law is helping seniors pay less for their drugs. It’s about to provide affordable insurance to thousands of Connecticut families that didn’t have it,” Murphy said.
Murphy, unlike some of his colleagues, said Monday that he would be participating in Connecticut’s health insurance exchange. At the moment Murphy and his family are on his wife’s insurance and not the federal employees insurance. He said they are looking to purchase insurance through the exchange, which opens for enrollment Tuesday.
Christine Stuart contributed to this report