The government shutdown’s impact is spreading through the economy

“The shutdown is stifling our ability to grow,” said Grant Richardson, who founded a wine import company, Pangea Selections, in 2019.

Richardson can’t close on a six-figure Small Business Administration loan while the federal government is shut down, but the impasse hasn’t given him a break on the roughly $20,000 in tariffs that he expects to fork over this month.

The entrepreneur from Austin, Texas, is still waiting to receive roughly $10,000 in business tax credits for the quarter. And he can’t seal a deal with a California winemaker to launch a new product line because the government is not approving new labels for bottles during the funding lapse.

“The government is still taking money from us, but it’s not paying out what it owes,” he said, referring to the tax credits.

The shutdown has frozen many of the government’s key functions, such as lending and processing tax credits. And now without pay, hundreds of thousands of federal workers across the country have pulled back on spending, creating economic ripple effects.

From restaurants in Washington, DC, to businesses around national parks, the shutdown’s impact is spreading through the US economy, with no relief in sight.

A wave of weaker economic activity

Sean Han, chef manager at Market to Market, a cafeteria at the Ronald Reagan Building in Washington, said foot traffic has declined about 20% to 30% since the government shutdown began — during a year that has already been tough because of mass federal layoffs.

The business hasn’t reduced employees’ hours yet, he said, but that could happen — in addition to the possibility of layoffs — if the shutdown drags on for longer. With fewer customers, Han said he directed workers to focus on giving whoever comes in a better dining experience.

“We’ve been around for about 20 years, so we’ve seen this before,” Han said. “But it took us nine months to recover after the pandemic and we’ll have to rebuild again once this ends.”

Restaurant reservations in Washington were down 9% last week compared to the same week a year earlier, according to data from OpenTable.

Many corners of the country are being affected by the shutdown

In North Carolina, Pam Anderson is caring for only a handful of dogs at her Ocean Sands K-9 Resort in Kill Devil Hills.

Some of her local clients have been calling off or shortening their vacations because the impasse has affected the national parks, or they are federal employees who are not being paid. At the same time, she is not getting any bookings from tourists, which she suspects is because the popular Wright Brothers National Memorial has shuttered.

Just this week, a local family who planned to leave their two dogs with her for a few days in mid-November pulled out, which will cost her $500 in lost revenue. The couple works for the federal government.

Although the kennel had a “rocking September,” reservations are down 40% for October and 60% for November so far compared to last year, leading Anderson and her husband to tighten their belts. They have stopped going out to dinner a few times a week and are holding off on their charitable giving.

“I told my husband the other day, ‘Don’t spend any money’,” said Anderson, 70, who is thinking of getting a night job.

Regions with a strong military presence are reeling

Last March, restauranteur Fran Bolden opened a cafeteria at the Redstone Arsenal, a US Army base near Huntsville, Alabama. It was a profitable side venture for Bolden in a town whose economic lifeline is the military, defense and aerospace industries.

But that restaurant, Arsenal Eats, is now shuttered until the government reopens. Bolden said they usually expect around 150 people a day for breakfast and lunch; the past two weeks saw only between 25 to 30.

“The volume is just not there,” she said.

Businesses all over downtown Huntsville and beyond are feeling the pinch, she said, and small businesses bear a big brunt of the burden.

“The local economy is in a military city. With people not out, not spending money, not sure what to do – we rely on the business of these people in order to be able to sustain ourselves,” Bolden said.

Trying to keep things going

For the past two years, toddlers at Bernard Jackson’s swim and wellness center in Washington, DC, have learned to float for the first time, and seniors in their eighties have practiced gentle exercises to stay strong.

But the shutdown has taken a heavy toll. With fewer families able to afford lessons and operating costs on the rise, Jackson has had to make difficult choices just to keep his doors open. Many of his clients are federal employees directly affected by the lapse in pay.

“Since people are not getting paid, they aren’t coming to their lessons,” Jackson told CNN as he was leaving an unemployment center.

“I can tell you at least 40% of my revenue has gone down.”

Even as attendance drops, Jackson is finding ways to support his clients. He continues to send instructions and exercises for them to practice at home.

“The pool is still open,” he said.