When government operations came to a grinding halt last Tuesday after Congress was unable to pass a funding extension, the impact wasn’t just felt by federal employees who were furloughed or agencies that had to close their doors. Many small businesses have experienced a blow across the country. For one thing, loans from the Small Business Association can’t be approved without federal workers on the job, and the backlog once the government does re-open could be six weeks or longer. But many also count federal agencies as the majority of their clients and have had contracts stopped dead in their tracks. Others who don’t even work directly for the government have seen the uncertainty over the budget battles translate into a drop in sales and customers.
LaJuanna Russell is the founder and president of Business Management Associates, Inc., which is a human capital management and business process management consultancy that primarily works with federal clients, and a member of the Small Business Majority’s Network Council. She had already had a “painful” year thanks to sequestration, she told ThinkProgress. “Sequestration was a major hit in the beginning of the year.” Her federal clients weren’t sure what their budgets would be and reduced spending, scaling back and even cutting some of her contracts.
The shutdown has compounded those problems just as she was trying to build back her revenue. “August and September can be very good months,” she said, since agencies try to spend down their funds before the end of the fiscal year. “Those contracts are scheduled to begin October 1. But then they shut down the freaking government.” She had already put in place all the people she needed to respond to the anticipated work, but now those workers, who are still on her payroll despite the abrupt halt, have had to be furloughed. “They could potentially go out and find other work,” she pointed out, which would mean going through the hiring and training process all over again when the work starts back up. “For those hanging around it’s a morale issue as well.”
That’s the short term. She hasn’t been able to look farther than that. “I haven’t even thought through all of the long-term impacts of this honestly,” she said. One problem she’ll face is proving to the banks that loan her money that revenue will come in. “If we have to go a complete month without revenue, that’s significant,” she said.
Her message for Congress? “They should be furloughed, they should not be paid, they should lose their health insurance.” She added, “This is unforgivable.”
Even those small businesses that don’t work directly for the federal government will be hurt too. Mike Brey is the owner of Hobby Works, a retail chain with five locations in Maryland and Virginia and 50 employees. “Sequestration and talk of the shutdown have been impacting us for a long time,” he said in an interview. Uncertainty among consumers, particularly federal employees who are heavily concentrated where he operates, has depressed consumption. “We’ve had a whole year of government workers not being really sure what the future holds and Congress has just made it worse,” he added.
Originally, he said that 2012 was looking to be a “terrific year.” But “starting at the end of 2012 with the election and sequestration talks and budget battles, a great year turned into a mediocre ending. And we’ve never really recovered from that.” The company went from having the best quarter in a while in the third quarter to the worst fourth quarter. Congress “killed what was going to be a great year for us.”
“For Congress to play these games, honestly, I find really frustrating,” he said. “Congress talked us out of an economic recovery. With [the shutdown] and the debt ceiling, they’re not satisfied with talking us out of a recovery. They want to talk us back into recession.”