A lapse in federal funding has triggered warnings from business and advocacy groups about widespread economic consequences, affecting government workers, contractors, and local economies across the United States. With agencies unable to engage contractors during the shutdown, vital operations—including national security initiatives—are at risk, according to James Carroll, CEO of the Professional Services Council (PSC). n nCarroll emphasized that disruptions to federal missions not only weaken public services but also create long-term inefficiencies and financial losses. The impact extends beyond federal employees: an estimated 1 million contractor workers nationwide may face delayed or lost wages, with little expectation of retroactive pay. n nSmall and mid-sized firms, which make up a significant portion of the federal contracting base, are particularly vulnerable. Cash flow interruptions could force layoffs or even permanent closures, undermining economic stability in regions dependent on government work. n nThe Northern Virginia Chamber of Commerce highlighted the ripple effects on service providers such as law firms, accounting practices, and real estate companies that support contracting organizations. Financial instability among clients quickly translates into reduced revenue and stalled investment decisions for these businesses. n nNonprofit organization Code for America warned that everyday Americans will bear the brunt of the disruption. CEO Amanda Renteria stressed that individuals relying on government assistance—such as families experiencing food insecurity, seniors needing health care, and veterans accessing benefits—may face delays or denials in critical support. n nShe also pointed out that furloughs or job losses among federal staff damage institutional capacity, making it harder for agencies to function effectively even after funding resumes. n nHistorical data underscores the economic toll. A Congressional Budget Office analysis of the 2018–2019 partial shutdown, which lasted 35 days, found it cost the economy $11 billion, including a permanent $3 billion reduction in GDP. n nTechnology and cybersecurity initiatives have also been frozen, wasting taxpayer resources and hindering the government’s ability to recruit skilled professionals in digital fields, said Tim Brennan, PSC’s vice president for technology policy. n nIndustry leaders are urging swift legislative action to restore funding, stressing that reliable governance is essential for public trust and economic health. n
— news from Government Executive
— News Original —
Shutdown’s ripple effect: Contractors, small businesses face devastating economic hit
Business and professional groups are warning that the current federal funding lapse will cause economic harm to not only government employees and contractors, but the broader U.S. economy and national security as well. n n“Federal agencies are not able to use the capabilities of contracting partners to sustain vital operations in a government shutdown,” said James Carroll, CEO of the Professional Services Council. “The national security consequences cause unnecessary risk to U.S. citizens both at home and abroad.” n nIn a column just days ahead of the Oct. 1 shutdown, Carroll sounded the alarm about multiple risks to the nation. n n“Shutdowns negatively impact essential federal missions, harm the U.S. economy, and cause inefficiencies and financial losses that have long-term consequences for our country,” he wrote in his commentary. n nStay in the know — Washington Technology’s Insider Membership gives you unmatched access to breaking news, in-depth analysis, and insights that federal contractors can’t afford to miss. Join today for 50% off. n nThe Northern Virginia Chamber of Commerce counts many government contractors among its members. Other NVC member companies such as law firms, accounting firms and real estate firms provide services to government contractors. n nThe shutdown is an economic threat to federal employees and contractors. Paychecks are delayed and sometimes lost. n n“This financial uncertainty immediately hits local businesses, from small storefronts to large firms, affecting everything from revenue streams to long-term investment decisions,” the chamber wrote in their statement. n nThe chamber’s concerns are backed by stark numbers. PSC estimated that at least 1 million federal contractor employees across the nation will be impacted by the shutdown and most of them will not receive back pay. n n“For small and mid-sized businesses, which form the backbone of the federal contracting base, this can mean devastating cash flow disruptions and workforce losses,” Carroll said. n nCode for America, a nonprofit organization that works to improve government service delivery, said all Americans will suffer. n n“Governing isn’t a game—the well-being of real people hangs in the balance,” said CEO Amanda Renteria. “A government shutdown deals a direct blow to people across the country who are doing everything right but still need assistance to put food on the table, access health care, and make ends meet.” n nRenteria said families facing food insecurity, seniors who need health care assistance and veterans will have a harder time accessing needed benefits, n n“The furloughing or firing of federal workers will deepen dysfunction and make it harder for government to deliver for the people it serves,” Renteria said. n nPSC cited a Congressional Budget Office report on the last shutdown in December 2018-January 2019, which lasted 35 days.. n nWhile that shutdown was partial, it still cost the economy $11 billion including a permanent loss of $3 billion in the gross domestic product. n n“Shutdowns freeze progress on vital IT and cybersecurity initiatives, waste taxpayer dollars, and undermine the government’s ability to attract and retain top technology talent,” said Tim Brennan, PSC’s vice president for technology policy and government relations. n nThe groups urged Congress and the president to act quickly. n n“People deserve a government that works for them. Our leaders in Washington must do better,” Renteria said.