How Will the Government Shutdown Affect Your Credit and Finances?

October 2nd, 2013 by Sarah


Despite all hope, the government shutdown commenced on Monday after Congress failed to pass the new budget. While we wait for those on Capitol Hill to resolve their issues, it’s important to understand how the short and long-term effects of the shutdown relate to you. Will they affect your finances? If so, what will the change mean for your credit repair efforts?

First things first: What are the short-term effects? A government shutdown is an ambiguous state, one that may have you wondering what it actually means. For the moment, here’s a breakdown of government entities, programs, and their statuses:

Remaining open:

    • Airports. Good news for travelers, bad news for workers. Over 14,000 air traffic controllers are currently working without pay. Their workers’ union also predicted a furlough of 3,000 employees if the shutdown continues.

 

    • U.S. Postal Service. The U.S. Mail is an agency independent of the government and will continue to operate without delay.

 

    • Social Security, Medicare and Medicaid. These programs are federally-mandated and benefits will be paid during the shutdown.

 

    • USDA food inspections. Red meat and poultry inspections will continue for a limited time during the congressional deadlock, though the USDA may be forced to reduce workers if the shutdown persists.

 

    • Public schools. Despite the Department of Education’s closure, public schools will remain open.

 

    • Federal courts. Reserve funds will allow federal courts to remain operational until mid-October.

 

    • Federal prisons. Breathe easy on this one. Inmates will remain incarcerated.

 

    • SNAP. Supplemental Nutrition Assistance Program (formerly known as food stamps) will continue to be funded through the end of October.

 

    • Patent and trademark office. Patent and trademark applications will still be processed during the shutdown.

 

    • Amtrak. Commuters who rely on the Amtrak will have a reliable mode of public transportation.

 

  • Military. While the military will remain active, it is unclear how long personnel will receive wages and benefits during the shutdown.

Closed:

    • National museums, parks, bike trails and zoos. Community enrichment is sure to be bleak during the shutdown. These federally-funded attractions will be closed until a new budget is passed (don’t worry, the zoo animals will be cared for).

 

    • FDA food inspectors. Say goodbye to seafood and dairy products. Without FDA approval, these and other food items will not be replaced at your grocery store.

 

The Undecideds:

    • Passport offices. Unless your local passport office is located in a government building affected by the shutdown, it should remain open. That said, it’s a good idea to update your international ID as soon as possible.

 

    • Government contracting jobs. The status of government contracting jobs is variable and depends on whether each project requires more funds to continue during the shutdown.

 

    • Immigration services. Although immigration services will continue, employers will not be able to verify employees’ legal status during the shutdown.

 

    • VA disability claims. While VA medical care is not immediately affected, VA-sponsored benefits programs could see cutbacks and delays.

 

    • Internal Revenue Service. Taxes are still required by law (If you filed a six-month extension in April, I’m looking at you). Despite this fact, IRS offices will probably close, temporarily delaying all work including help services, audits, meetings, refunds, and other correspondence.

 

    • National Archives. Lack of immediate funding will likely close the National Archives during the shutdown.

 

  • Federal websites. Good luck finding current information on government-related websites. According to WhiteHouse.gov: “Due to Congress’s failure to pass legislation to fund the government, the information on this web site may not be up to date. Some submissions may not be processed, and we may not be able to respond to your inquiries.”

You’re likely to find the same sort of message on government websites until the shutdown is reversed. For the latest information, stick to national news sites.

Long-Term Effects

While the information above may seem straightforward, it gets more complicated as the problem lingers on. In addition to the short-term woes, an extended shutdown (i.e., more than two weeks) will lead to dangers involving:

    • Job security. The federal workforce of 2 million employees is divided into “essential” and “non-essential” personnel. During an extended shutdown, non-essential workers will face layoffs without pay. Their essential counterparts are categorized as those who “provide for the national security” and the “safety of life and property,” and will remain employed. This portion of the federal workforce includes the president, Congress, officials within the Defense Department, uniformed military and border patrol, food inspectors, and air traffic controllers. While these workers will keep their jobs, a prolonged shutdown could mean furloughs and extended work without pay, with no guarantee of reimbursement after the shutdown is lifted. In short, nearly all government employees face loss of income within a stalled system, an eventuality that will hurt families with little savings and high debts.

 

    • Military wages. Government employees aren’t the only ones facing an empty bank account. Until the federal budget is passed, roughly 1.4 million military personnel will see a delay in their paychecks. To make matters worse, active-duty members are still required to work without pay.

 

    • Housing. U.S. housing programs account for 30 percent of all real estate loans. A prolonged shutdown will effectively stall ongoing deals, resulting in lost opportunity for individuals and a dip in the national housing market.

 

    • Educational loans. According to the Department of Education, more than 57 percent of undergraduates rely on federally-funded loans to attend college. Ironically, the DOE’s closure will leave students without new funds to attend school. The result will likely be a mixture of reduced enrollment, financial strain on families, and an increase in private borrowing, all of which carry a greater measure of risk.

 

    • Health. A lack of funding will force the Centers for Disease Control and Prevention to close just in time for flu season, preventing them from producing and distributing necessary vaccines. The shutdown will also affect the Department of Agriculture’s Women, Infants and Children (WIC) program, founded to provide healthy food to 9 million pregnant women and new mothers.

 

    • VA benefits. A two week shutdown could spell disaster for the Department of Veterans Affairs, preventing them from paying disability claims or pensions to 3.6 million veterans.

 

  • Social Security, Medicare, and Medicaid. Although these programs will remain in effect, a decline in personnel is likely to delay processing.

What can you do?

The backlash of the shutdown is daunting at best. When faced with impending financial strain, there are a few things you can do to protect your personal liability:

    • Know the facts. If you are affected by the government shutdown, it’s not enough to resign yourself to a furlough. Get the facts. Find out exactly how your salary, leave, benefits, etc., are impacted, and apply the financial changes to your budget. If you are among the employees who are ordered to work without pay, learn more about the legal limitations of those orders. This strategy will help you refocus your resources during this difficult time.
    • Halt spending. Put a stop to any non-essential spending, including investments, until the aftermath of the shutdown unveils itself. Prioritize your bills, clip coupons, and get serious about your emergency fund. We can’t predict the outcome of this governmental fracture. When the future is uncertain, saving is imperative.
    • Update your résumé. If you’re facing lapsed benefits or a furloughed job, it’s time to dust off your résumé and look for Plan B. It’s not ideal, but protecting your finances demands assertiveness. While you can’t do much about Congress, you can take steps to keep your family safe. Take advantage of every option available.
  • Ask for help. Good news: Your electric company is not a federally-funded program. Many businesses are sympathetic in times like these, especially concerning loyal customers. If you are worried about making ends meet, call your creditors and explain the situation. Ask about temporary forbearance programs or reduced payment plans. Delaying your bills may not solve your problems, but it will protect your credit score while you are dealing with the side effects. Don’t let government waves rob your stability. Keep your financial reputation in fighting form.

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