A government shutdown will directly impact close to 1 million workers and another 3 million dependents, according to the Washington Post. Affected payrolls are $1.4 billion a week. While many critical positions will not be shuttered, the report is that 45% are administrative staff, and tens of thousands of blue-collar workers will not see paychecks. Typical income is $85,600, but almost 111,000 make less than $50,000.
The challenge: How to stay afloat as the paychecks stop, which is the subject of today’s read from CNBC.
- Amid the stalemate in Washington, credit unions and banks across the country are making accommodations for government employees.
- Launch Federal Credit Union is issuing zero-percent interest rate loans of up to $3,000 to employees of the federal government.
- Some banks also are waiving certain fees and allowing customers to break certificates of deposit early.
So, what to do?
Fortunately, the winter holidays are behind us but there is still food to buy and doctor bills to pay.
- With the government shutdown now in its 18th day, banks and credit unions are offering accommodations to federal workers who’ve seen their paychecks stop.
- Some 420,000 employees are considered “essential,” and are working without pay, while 380,000 others have been ordered to stay home, according to calculations provided to CNBC by Paul Light, a professor of public service at New York University.
- The shutdown’s reach also fans out to some 4 million contractors for the federal government, many of whom are unlikely to be included in any legislation Congress passes to make sure federal workers are compensated for the period the government was closed.
There is plenty of buzz about the impact of an extended shutdown. Food stamps will be an option for some workers, but the Philadelphia Inquirer suggests that if the shutdown proceeds, that will not even be an available for many impacted workers. MarketWatch suggests that the IRS is operating under a contingency plan, which might slow down refunds.
In a NY Times article titled “It’s Payday for Many Federal Workers. One Problem: There’s No Paycheck, comments center on the household impact.
- …unpaid federal workers across the country, from the Washington suburbs to farming towns to remote federal prisons, are growing increasingly desperate and furious at the political impasse.
- They are now in shutdown survival mode: opening new credit card accounts to pay off their bills, borrowing from relatives and eating the dregs of their pantries. unpaid federal workers across the country, from the Washington suburbs to farming towns to remote federal prisons, are growing increasingly desperate and furious at the political impasse. They are now in shutdown survival mode: opening new credit card accounts to pay off their bills, borrowing from relatives and eating the dregs of their pantries.
- Financial fears that once seemed implausible — overdraft fees, missed mortgage payments, lowered credit ratings — are now consuming many.
Al Jazeera, the Arabic media channel, is having a hayday with its reporting of this mess, indicating a $6 billion-per-week impact to the US economy
For now, expect to see spend volume increases on Mastercard, Visa, and Discover cards; because of the demographics, Amex will be less affected. And, while volumes will surge, depending on how long the powerplay goes, Credit Manages should expect a delinquency spike in early 2Q19.
… A wall or a house of cards?
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group