Trust issues: D.C. dysfunction means uncertainty for companies

 Visitors to the Everglades National Park enjoy the views after it reopened to visitors today, following a 16-day closure stemming from the partial federal government shutdown.

One word describes the current government outlook: uncertainty. No one is sure whether or not Congress will shut the government down again come January 15. If it does, contractors and people who do business with Uncle Sam will be left out in the cold. That kind of uncertainty can play havoc with business and with the economy at large.

For government contractors, no work means no pay. It’s not surprising that some of them now have trust issues with the government.

"I was hoping that when we came out of furlough and shutdown we would be able to breathe a sigh of relief,” says Dana Marlowe. She's principal partner with Accessibility Partners, a firm contracted by the government to make technology accessible for people with disabilities.

She says the last shutdown was nerve wracking enough.  "And now with this brand new January deadline, it feels like 'uh oh we could be going through this again,'" Marlowe says, noting the shutdown cost her company tens of thousands of dollars.

Given that in just a few months the government could once again come to a grinding halt, what’s a contractor to do?  “The first thing that we see them doing is hoarding cash,” says Eric Crusius, an attorney with Centre Law Group in Virginia. He specializes in government contracts, and says smart contractors are making sure they have the means to pay overhead costs like salaries and utilities. Those types of costs continue whether there’s a shut down or not.

In addition, Crusius says, companies may want to reevaluate their own agreements with subcontractors so as not to get stuck paying for goods and services they can’t afford.

And there is one more drastic step that contractors might take: Not working for the government at all. Theo Watson, an attorney with Watson and Associates in Colorado, says companies should consider finding more work in the private sector.  “A lot of contractors just soley wait on payment from the government, that’s their bread and butter, however, when that shuts down their whole business is crippled,” he says.

However,  Crusius notes it’s not just contractors and government employees who suffer. He says uncertainty has a corrosive effect on the entire economy“Certainly there has been a cost to the wider economy,” he says. "I’ve seen it with our clients alone." 

Standard and Poor's estimates this shutdown cost $24 billion dollars, and today, Bloomberg said its consumer comfort index plummeted to its lowest level since late March. It found nearly half of Americans believe the economy is getting worse. Crucius says that’s uncertainty talking its toll, "You’re seeing a lot less people on the streets, a lot less people willing to make big purchases when they’re uncertain about their future."

With consumer spending such an important part of the economy, our uncertainty could end up costing a lot more.

 

 

About the author

Sally Herships is a regular contributor to Marketplace.

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