Bracing For the Worst

My study of economics consisted of one survey class I took in college; I was far out of my academic comfort zone, and only managed a C. So, I can offer no particular expertise regarding the government shutdown and its impending arrival at its borrowing limit, or debt ceiling, which is slated to occur Thursday. Therefore, I’ve reviewed several articles that outline some of the real and potential effects of the government’s inactivity.
Many problems caused by the government’s shutdown of what it deems “nonessential” functions are fairly cut-and-dried. However, the looming debt-limit crisis is reaching uncharted territory (of course, the level of infantile gamesmanship displayed by our elected officials is equally unprecedented – garbage in, garbage out), and opinions vary on what will happen.
For the purposes of signmakers, the shutdown and debt limit’s impact on small businesses are of utmost importance. Here are several explanations and theories of actual and anticipated outcomes. This is one instance where I sincerely hope events take place between now and Wednesday that render this column irrelevant. That said, we’d appreciate hearing ways the shutdown has impacted you, and how reaching the debt limit would, if it occurs.

• According to a CBS News article posted on October 13, the Small Business Administration (SBA) approves approximately 250 loans daily, which total $90 million. If you’re a signshop owner who’s applied for such a loan, your plans have been deferred by the government’s inertia.
• An October 8 Washington Post story notes that, in addition to the SBA’s inactivity, the IRS is also on hiatus, which means that lenders who rely on IRS documentation to verify financial information can’t have requests fulfilled, which delays other small-business funding avenues. The same article also references that contractors doing work for Federal buildings or property are having their projects mothballed during the shutdown. Obviously, this shuts down work for any signshop working under a federal contract.
• An October 7 Huffington Post.com article outlines 50 adverse effects of the government shutdown. Some are of life-or-death importance, and other relatively trivial, but it outlines the shutdown’s far-reaching implications. If other business owners are suffering cashflow issues, they’re going to be forced to divert remaining income or savings to survive. Odds are, they’ll view a new sign as peripheral in comparison to paying overhead and employee wages.

Now, about the debt ceiling. One Reuters report, which was posted on www.voanews.com, indicates the Treasury Dept. would deplete its cash on hand on Wednesday, October 30. On the 31st, according to the report, a $6 billion payment is due to Treasury bondholders. If the government defaults on this payment, confidence in Treasury bonds, a vital global-economy cog, and confidence in the government’s credit-worthiness will be shaken, and the government’s borrowing costs will probably rise. It’s only logical that these higher borrowing costs will flow downstream and raise interest rates for business loans, credit cards and any other type of borrowing vehicle. And, according to the article, the dollar’s value would weaken against other currencies, and would adversely impact buying power.

As I said before, nothing would make me happier than to see an 11th-hour resolution that reduces this to nothing more than an academic exercise. In other times of adversity, from World War II to 9/11, our leaders have embraced their roles and put differences aside, at least momentarily, for the good of the country. We can only hope that this occurs once again.