What a Partial US Government Shutdown Means for Shippers

Source: JOC


What a Partial US Government Shutdown Means for Shippers

Locked gates to business

WASHINGTON — Shippers shouldn’t expect any delays in the clearance of cargo at ports of entry, nor will highway, road and bridge construction cease, if the federal government partially shuts down because of a fight over President Obama’s health care law.

But the potential shutdown, which would be the first in 17 years, would hurt economic growth, presenting new hurdles to shippers and transportation providers already grappling with a slow recovery since the 2008-09 recession. A shutdown lasting a few days could cost the U.S. economy 0.2 percent of annualized growth in the last three months of the year, while a shutdown lasting three to four weeks could take a 1.4 percentage point bite out of fourth quarter GDP, Mark Zandi, chief economist and co-founder of Moody Analytics, told CNN.

The larger risk is that investors’ nerves become more frazzled because of the shutdown, causing them to demand higher interest rates when the U.S. Treasury asks for $120 billion in loans on Oct. 17, according to The Washington Post. That would cause rates to jump, “leading to more expensive mortages, auto loans and credit card bills.” Ultimately, the impasse could reduce U.S. companies’ confidence to spend the cash they’ve been hoarding since the recession.

Aside from the potential negative economic impact of the shutdown, the effectiveness of the government will be severely restricted, Bruce Carlton, president and CEO of the National Industrial Transportation League, said in a statement. The potential shutdown and sequestration will force “federal managers to run multibillion dollar programs on consistently more constrained short run timetables,” he said.

“If you or your company were forced to procure essential products or services on an inconsistently applied and unpredictable one month or three month basis, what would be the impact on the price you paid?” Carlton said. “That’s the reality of ‘managing’ the federal budget on the mindless direction of continuing resolutions and across-the-board sequesters.”

In the short term, however, the impact on shippers will be minimal. Customs and Border Protection agents will continue to clear cargo, and air traffic controllers will keep manning the towers. Spending tied to trust funds — including the Highway Trust Fund, Inland Waterway Trust Fund and Harbor Maintenance Trust Fund — will continue.

Construction spending will slow even if Congress can pass a continuing resolution, warns Sarah Kline, research director at Transportation for America. That’s partly because the HTF has enjoyed a $12.6 billion transfer of general funds to make up for a funding shortfall, and that Band-Aid is subject to cuts of more than $900 million.

“Unlike other programs, though, this cut does not directly lead to cuts in funding for highway and transit projects,” she said. “What it will do is speed up the timeline for the Highway Trust Fund going broke, creating the potential for greater cuts or the need for similarly large transfers of general funds — a difficult proposition.”

The Transportation Investment Generating Economic Recovery program, better known as the TIGER grant program, could be reduced by $41 million to $500 million in fiscal 2014 due to sequestration cuts, Kline said. The first wave of sequestration cut the program used to leverage state and local infrastructure dollars by $25 million in fiscal 2013.

Learn more about the impact of sequestration

In terms of a government shutdown, the biggest impact will be on non-essential federal transportation personnel. Only three of the 140 employees at the Surface Transportation Board, the railroad regulatory agency, are exempt from furlough, while 467 of the 886 Federal Railroad Administration workers would be furloughed.

Of the 830 workers at the Maritime Administration, 451 would be furloughed if the government shuts down, according to Department of Transportation estimates. Midshipmen at the U.S. Merchant Marine Academy would remain on campus but not attend classes under a short-term shutdown. Students would be sent home if the shutdown lasts more than a week, and midshipmen would remain at sea.

In the office of Transportation Secretary Anthony Foxx, 382 of the 730 employee face furloughs. Despite the threat, the DOT said late last week that it “believes there is enough time for Congress to prevent a lapse.”

“That said, DOT has begun working with (the Office of Management and Budget) to prepare for the possibility of a lapse, consistent with what was done in previous instances where a potential lapse in appropriations was approaching,” the agency said in a Friday statement. Congress has until midnight to strike a deal to avoid the partial shutdown.