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The Shutdown Showed How Precarious Americans’ Finances Really Are (Atlantic)

3 February 2019


The Atlantic title: The Shutdown Showed How Precarious Americans’ Finances Really Are

The Atlantic subtitle: What began as an impasse over the border wall became a warning sign of creeping instability.

“The longest government shutdown in American history is over. After 35 days and two missed paychecks, this week government services have returned and federal workers will be paid. Though the relief is only temporary, as Congress begins negotiations to prevent another shutdown in three weeks, normalcy will return for now.

That normalcy, however, is tinged with foreboding. While the gears of government will start to grind on, largely as if nothing happened, the shutdown highlighted tensions in American life that amount to a political time bomb. The shutdown made apparent not only the federal safety net’s inherent weaknesses, but also the precariousness of federal workers’ and contractors’ finances. And Trump-administration officials revealed a lack of understanding of how the closures affected American workers and the economy. A shutdown that began as an impasse over federal funding for a border wall became a warning sign, over its month-long course, of creeping instability.

For days, political observers have debated what the tipping point was for Trump in his decision to temporarily reopen the government. Was it the mass stealth strike from reinvigorated and mobilized federal labor that won the day, in the form of the air-traffic controllers who called in sick, leading to delays on Friday at multiple major airports? Or was the shutdown’s end already well in motion before the Federal Aviation Administration started grounding flights, thanks to congressional and political pressure from a strengthened Democratic Party?

While both dynamics played a major role in finally shutting down the shutdown, interclass disgruntlement and a fragile economy may have had some part in the resolution, too. Especially during the last week of the closures, Trump-administration officials seemed unable to grasp what the shutdown was actually doing to families. First, the White House economic adviser Larry Kudlow told CNBC that he did not think the economy had been seriously affected by the federal furloughs and that he expected “a snapback right away” when the government reopened, even as billions of dollars in economic activity slipped away and lines at local food pantries grew. A few days later, Commerce Secretary Wilbur Ross expressed puzzlement that federal workers would need to visit food banks, saying that “there really is not a good excuse why there should be a liquidity crisis” and urging workers to seek out bridge loans from credit unions in order to make up missed pay. Later that day, Trump himself said that banks and grocery stores would “work along” with struggling federal employees, suggesting that the institutions might somehow waive interest on loans or provide food on credit.

These comments give weight to the critique that the federal government is currently run by ultra-wealthy politicians who have little connection to the experiences of working people. That perception seems to have already damaged Trump’s appeal among the electorate. His approval ratings dropped during the shutdown, and in a new NBC News/Wall Street Journalpoll, half of Americans blame him directly for the closures and their negative effects. The administration, at least, attempted to walk back some of its messaging: Public backlash to Ross’s and Kudlow’s initial statements were what led Trump to his own ham-handed attempt at clarification. By the time he announced a deal to end the shutdown on Friday, Trump had mostly abandoned his earlier spin, telling federal workers that “many of you have suffered far greater than anyone but your families would know or understand.”

But the administration’s missteps were more than just a public-relations fiasco, and the “suffering” that Trump mentioned extended far beyond just the full-time federal workforce. There were deeper structural issues at work. Across the country, federal transportation employees lined up at food banks, indicating a rapid destabilization of the public sector. (Lines reached “[Hurricane] Katrina-like” lengths for employees of Atlanta’s Hartsfield Jackson International Airport, the city’s mayor, Keisha Lance Bottoms, told me.) Functionally, one to two missed paychecks sent many federal workers—many of whom have solidly middle-class or upper-middle-class incomes—temporarily into the ranks of poverty. They looked to other means to pay their bills: Some tapped into retirement accounts, some took on interest from bridge or payday loans, some racked up debt on credit cards, and some even resorted to pawn shops. For many federal workers, the gap between paychecks was enough to qualify them for monthly food-stamp benefits.

Even for many of those workers not officially on federal salaries, the shutdown represented a squeeze. Federal contractors also went without pay, and it’s unclear whether they will receive back pay at all. Many of those contractors—for example, maintenance or custodial workers—are themselves members of the working poor.

And that’s not to mention the shutdown’s implications for those on federal assistance. On multiple fronts, the shutdown likely exacerbated ongoing struggles with income and wealth inequality. For poor and low-income people across the country, the shutdown meant real or threatened constrictions on housing and nutrition programs. The closures revealed that many housing authorities lack the reserves to survive any prolonged disruption of federal funds, and shrinking food support began to strain food banks and local grocers. The shutdown was especially difficult for people who depend on more than one federally subsidized program, including low-income contractors who may live in subsidized housing and qualify for food assistance.

The Trump administration didn’t seem to see these disruptions as serious or permanent, viewing any loss of economic activity as recoverable and any hardship among workers as easily remedied. As my colleague Annie Lowrey wrote last week, “In this telling, the shutdown is an economic event like a hurricane”: It might disrupt economic activity during the disaster, but afterward, economic indicators will quickly return to normal. But as the country has learned after multiple natural disasters over the past two years, crisis events can widen underlying structural inequalities, and can expose areas where systems lack long-term resilience.

The shutdown, for example, exposed an ongoing savings crisis among public-sector workers, of whom two-thirds have liquid savings that amount to less than a month of income. The problem is unlikely to be fixed anytime soon. In August, Trump announced plans to cancel federal workers’ upcoming pay raise, after granting them a 1.9 percent pay increasein 2018, less than the 2.1 percent that was expected. Their lean circumstances mirror a broader savings problem among low-income workers and follow a long period of real-wage stagnation, even as profits for partnerships and individual-owned companies—many of which are operated by wealthier Americans—have risen. The closures also exposed how, in some places that sharply limit eligibility for assistance, the safety net has been rendered threadbare, with food programs appearing especially inadequate.

That wobbly foundation was given a few extra wobbles by the shutdown. Federal employees and contractors now going back to work face the prospect of another shutdown in three weeks, even as some of them manage higher debt and ruined credit. Income inequality more broadly continues to rise. Public trust in government and the economy is faltering. According to the University of Michigan’s ongoing poll, consumer confidence this month plummeted by almost eight points, erasing almost all of the gains built since 2015.

Perhaps those Americans whom the university polled see storm clouds on the horizon, and maybe the shutdown brought them into full view. Perhaps respondents are losing faith in an administration whose representatives have shown themselves to be out of touch, and one that’s pursued a domestic economic agenda of tax cuts and cuts to the safety net. Their discontent, and that of federal workers and their elected representatives, helped end the shutdown. That ending said much for the endurance of everyone affected, but perhaps not much for what they have left.”



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