Shutdown Hitting Private Sector As Defense Contractors Furlough Workers
The government shutdown is starting to have effects in the "real world."
The effects of the government shutdown are starting to be felt in the private sector:
Lockheed Martin became the latest government contractor to announce furloughs due to the federal government shutdown.
The defense contractor said it will furlough 3,000 workers starting Monday, Oct. 7.
“I’m disappointed that we must take these actions, and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown,” said CEO Marillyn A. Hewson. She said that workers would be allowed to use vacation time if they have it available so that their pay and benefits would not be affected.
Lockheed Martin has 120,000 employees, 95% of whom are based in the United States. Its contracts with the federal government accounted for nearly $39 billion in 2012, which represented more than 80% of its overall revenue.
Earlier this week United Technologies announced 2,000 of its workers will likely be furloughed starting next week. Those affected make Black Hawk helicopters through its Sikorsky Aircraft subsidiary, as well as aircraft control systems and a variety of other high-tech products. United Technologies said furloughs could grow to 4,000 if the shutdown continues through next week, and 5,000 if it goes into next month.
The impact of the shutdown are also starting to be felt outside the defense contracting industry, including at Boeing where the delivery of aircraft to airlines around the world will likely be delayed due to the fact that the FAA inspectors that must certify the aircraft are all currently on furlough. Boeing is saying that the slowdown in deliveries won’t impact production or lead to furloughs, although that obviously may not be the case for the military work that Boeing does.
These, of course, are just some of the most prominent examples of the economic impact that the shutdown has already started to have. Local news here in the D.C. area has already highlighted the stories of smaller contractors being impacted by the shutdown, as well as the myriad of tangential businesses ranging from restaurants to the Metro System that are seeing a significant drop off in business since Tuesday when the shutdown went into effect. Below that, of course, are the people who work for these businesses who rely for their own wages on customers who aren’t showing up for work these days. There are similar reports from across the country, especially from private businesses that make their money in many of the nation’s largest National Parks on guided nature hikes, fishing expeditions, or kayaking and river rafting tours. The longer the shutdown goes on and the particular departments of the government that they cater to remain largely shuttered, the larger the impact on the economy will be.
According to some analysts, an extended shutdown could have a significant impact on an already weak economy:
“Government shutdowns have been surprisingly common since 1976,” writes Guy LeBas, chief fixed-income strategist for Janney Capital Markets, in a note to clients. He points out that the current shutdown is actually the 18th such occurrence since 1976. The vast majority of standoffs, however, have lasted just a few days. Given the apparent distance between Democrats’ and Republicans’ positions, analysts have been using the most recent 1995-96 shutdown (which lasted a total of 26 days) as a yardstick against which to analyze the current situation.
LeBas estimates that if the 2013 shutdown lasts a similarly long time, it could shave 0.8% from economic growth in the current quarter. The effects would become more severe the longer the shutdown lasts. This reduction in economic growth would come primarily from roughly 800,000 federal workers being put on furlough and left without paychecks to spend. But as analysts at Macroeconomic Advisers point out, the long-term effect on the economy will have as much to do with how the budget impasse is resolved as how long it lasts. They predict that a two-week government shutdown will shave 0.3% from economic growth, but that the effect will be reversed in the following quarter if the government ends up instituting back pay for workers who were furloughed, as it did in last time.
In other words, the overall impact of a government shutdown on the economy will be muted, as long as Democrats and Republicans are able to come to an agreement relatively quickly. But that doesn’t mean that the economy will walk away from this showdown unscathed. “The real economic cost, which is extremely hard to measure, comes from heightened uncertainty,” writes LeBas. “Greater uncertainty will create hesitancy on the part of businesses to embark on new projects, and encourage consumers … to save rather than spend.”
The larger economic impact, of course, would come from a failure to increase the debt ceiling that places the government in the position of trying to decide which obligations should be paid out of the limited funds available without borrowing and those which should go unpaid. Quite obviously, those people who are owed money by the Federal Government and don’t get paid are going to be the ones most severely impacted. However, the uncertainty that would be created in such an event would be event more severe than anything a shutdown might create, although one wonders just what happens if both are going on at the same time.
The indirect growth of government in the guise of private contractors (because they are more efficient – never been proven) has partially hidden the magnitude of harm the shutdown has caused. Granted, a debt default is probably worse, but for a large percentage of American families who play by the rules, once again, it’s time for a beating. Over principle. Not at all about ‘disrespectin’
“The defense contractor said it will furlough 3,000 workers”
But Govt jobs are not real jobs, no Tea tears over this..
Of course, it is difficult to tell how many of these furloughs are due the general shutdown and how many are due to the White House instruction to make it as painful as possible.
And the White House has no interest in bringing the shutdown to an end “because we’re winning”
The private operators in the National Parks are being severely impacted by the Obama directive to force the closure of operations on leased park land that require no federal employee activity to continue. They even forced the closure of a popular cliffside restaurant outside San Francisco because it is on park land but abuts a major highway and uses no federal monies or employees.
It is unfortunate but the pettiness of Obama is making it difficult to know who is more to blame for the secondary impacts.
It is a time for everyone to recognize their dependency upon federal activity and make conscious decisions on whether it might be better to work to cutback on those dependencies where possible. Such as instead of depending on the FAA, an industry safety group such as ABS for shipping might be a better method of providing inspections during construction with the FAA conducting oversight like the USCG does.
I’d hardly consider defense contractors who earn a majority of their profits from the government to be a good example of the “private sector”. That said, in many localities around the country the money these employees won’t be spending while they’re laid off will surely have a detrimental effect on many truly private sector businesses.
I think Obama had an obligation to make shutdown visible, and why not? This is what you wanted, and an invisible shutdown is impossible anyway.
Regardless, if you want to take away the little flexibility he has, in shutdown, pass a budget resolution.
If you don’t want to pass a CR, stop complaining.
Really just a crystallization of Republican continuing efforts to sabotage the economy.
You don’t want Government. Voila…we don’t have Government.
It’s OK if someone gets sick…and is financially devastated. That’s the world Republicans want.
But Defense Contractors. Whoa, Nellie.
Pathetic human beings.
@JKB: how about the pettiness of the republican members of congress that have refused to send the budget to conference for the last 6 months? While the President has some leeway in essential vs. non-essential, there isn’t a lot. The simple way to fix this is to do a clean CR, which, by the way, is the democrats caving on republican wanted funding levels, and start negotiating the budget. Holding the country hostage is a stupid ploy by the Republican Party to extract power that they can’t get at the ballot box. The pain is all on them. The President has been willing to discuss all sorts of reforms, including social security cost of living adjustments, and modifications to Medicare and Medicaid, but because of the all or nothing attitude of only a portion of the republican members of the house, we have been going from one crisis to the next crisis. This is no way to govern. If the Republicans want to be seen as a legitimate political party, they need to grow up and act like adults.
@JKB: JKB, I have never taken the time to thank you for giving support to the liberal cause.
Keep up the good work, pal!
Actually, Obama’s obligation is to stop all non-essential government activities that would incur enforceable claims against the government for payment, i.e., those activities resulting in wages, contract payments, purchases, etc.
The stopping of activities that do not result in enforceable claims for payment did not need to stop. Nor did monuments that did not require manning and were normally open 24/7/365 such as the WWII monument need to be closed. Yes, the “interpretive” tour guides would not be available but then they are the very definition of non-essential.
Also, unlike the public sector employees, the government is not going to pay the defense contractors for work not performed. Those defense contractors may be able to take leave in lieu of work but with no work, there is not make up pay in the future.
It is a time for everyone to recognize their dependency upon federal activity and make conscious decisions on whether it might be better to work to cutback on those dependencies where possible. Such as instead of depending on the United States Army, a mercenary group such as Blackwater might be a better method of providing national defense.
It is a time for everyone to recognize their dependency upon federal activity and make conscious decisions on whether it might be better to work to cutback on those dependencies where possible. Such as instead of depending on the CIA and FBI, an industry private investigations and security group such as Kroll might be a better method of providing intelligence.
and think of how much more effective that argument would be if there wasn’t the pettiness of purposely shutting down things that not only didn’t cost money to keep open but require money and personnel to keep closed.
Republicans like JKB are so funny…the unintended consequences of their actions are all Obamas fault.
You know what would be nice? If conservatives stopped pimping veterans in an attempt to shift blame for their shutdown.
You wanted a shutdown, you got it – warts and all.
Of course monuments require manning. They need security so they’re not defaced or attacked, they often need upkeep, they need someone to maintain the electricity, lights, etc.
If, for example, the government had not closed down the Statue of Liberty, and it was then defaced/attacked, the very same people complaining that the monuments were closed would be complaining that the monuments were left open without protection.
Well, of course. It’s NEVER the Republicans’ fault. Nothing that ever happens can ever be their fault. They have a magic accountability and responsibility deflecting shield that prevents that. Things just happen to them, for no good reason, and they’re always life’s victims, never it’s actors.
Perhaps you could choose some activities not part of the national defense which is a fundamental activity of the federal government. Perhaps one of the many that are “optional”?
But one should work to reduce their dependency upon the US Army. The whole militia part of the Constitution involves that. So does the right to keep and bear arms. A right that facilitates the citizen to maintain familiarity with firearms and thus be able to act more effectively either under a formal military structure or an informal one (should an insurgency become necessary due to invasion or usurpation of the Constitution)
Okay, how about roadside pulloffs such as along the GW Parkway or parking lots such as at Mt Vernon.
The Park Police were not furloughed.
Maintenance can be deferred. The electricity was not cut off under the shutdown. If all the bulbs burned out, then closing the monument at night might be reasonable. Although, except for the city folk, most Americans aren’t afraid of the dark. Even less so where handgun carry is permitted for self defense
Which means that these layoffs will actually have a permanent negative effect on the private sector in their surrounding communities.
People not getting paid during the shutdown is “bug” … not a “feature”.
Closing buildings, etc. is understandable. Also, I believe that a boat is required to access the Statue of LIberty. Plus, it wasn’t open 24/7/365 prior to the shutdown.
Let’s stay focused, open areas that were not normally manned for all open hours don’t require shutdown, just suspension of manned operations.
Shutdown aside, I have to admire the double-think encapsulated in these two sentences. Sentence one: I’m not afraid. Sentence two: I’m so afraid that I carry a deadly handgun on me at all times because I can’t defend myself without one.
You have to love a mentality that constructs its own reality where the people who feel the need to carry weapons to protect themselves are the brave ones, while those who confidently walk around weapons free are the frightened ones…..
And with that, I cease commenting for a few hours as I tremblingly venture out into the urban jungle, armed with nothing but my fists and wits to protect me. If I was more of a man, I suppose I’d tuck a gun into my running shorts, but I just don’t have the guts.
If I don’t make it back — avenge me.
But progressives keep repeating the meme that there need to be far fewer defense workers and they need to be paid much less. Progressives should be cheering that entitlements are still being paid while defense workers are not being paid. Progressives have told us many times that such an economic situation is the key to prosperity in the future.
If progressives are cheering this, then they’re wrong. (IMO)
I’m really tired of people making a distinction between private and public sector workers as if one is budget friendly and the other isn’t. Get this: Every single Federal Reserve note in anyone’s pocket…anywhere…. carries a debt burden to the US taxpayer of principal plus interest. That money is paid thru taxes raised by the Fed gov’t. In this context, there is very little distinction between the two.
And now the cheese gets really binding, donor class at all levels is being affected.
That said, having been around the military my whole life, I do think that having contractors do so many jobs that used to be done by either active duty military (or GS employees) has not been proven to save money, and has caused at least as many (if not more) problems than it supposedly solved. So in that respect, yes I would like to see an end, and if possible a reversal to “privatization” in the military.
I realize that the right wing media has told you to focus on park shutdowns. I also realize that you, being you, are going to be a good boy and do what you are told.
I am going to stick my neck out and speak for the group – we are going to continue to think for ourselves.
I’m pretty sure that the Office of Trivial Details was furloughed, leaving no one to deal with trivial details such as whether this particular restaurant is a special snowflake of private enterprise on public land. A government shutdown is, by its nature, a blunt instrument. Close the parks means close the parks.
the problem with having civil servants do most of the work is now inflexible the workforce becomes. Remember right after 9/11, the Defense Department had a terrible time reorganizing itself because you cannot force a civil servant to change jobs. Also, body shop contracting allows the government to continue to use the skills and knowledge of retired civil servants/military/law enforcement, and to pay for senior level people who would never be paid as much in they had to start as low level civil servants.
Also, contracting, in the form of manufacturing, is just something the federal government cannot do. The biggest problem I have seen in contracting is the lack of management ability in civil servants to control and get quality out of their contractors.
But the (sad) reality is that there are literally millions of people in this country who wholeheartedly believe that if the federal government had (through some unknown magic trick) produced a balanced budget in 2009-2010 that the economy would somehow be “better” right now.
… as opposed to the depression such a policy almost surely would have induced.
The lying about the federal government really ramped up with Ronald Reagan, then was carried forward by talk radio and Fox News. But Reagan was the Great Liar. Something we should all remember about him.
Ahh, ok, took me a couple of reads, but now I think I see how this pretzel twists …
So basically, if contractors ever produce inferior work, it’s clearly the fault of the active duty military or civil servant personnel who didn’t properly manage them?
Real world to John Boehner, Real world to John Boehner, come in John – Grow a sack already and pass a clean CR at your already defined GOP spending levels (which Dems don’t want but will vote yes to, man those crazy Dems)
I doubt if Sen Reid will allow the Senate to vote for a CR that is at Republicans spending levels. Since the Republicans will always be blamed for any government shutdown, there is reason for the Democrats to negotiate. The Democrats want total victory and will accept nothing less.
Anyone who supports the shutdown has no room to complain about what is shut down. It is not an intellectually honest position.
Do you really believe that? Is that sentiment sincere?
I mean, I know it’s a popular talking point, as is this stuff about the National Parks, but it’s slightly ludicrous. As was this Rand Paul op-ed on CNN.com where he ludicrously says:
Really, Rand? You think we’re that stupid, huh?
You might recall, of course, that Rand Paul was caught on an open mic, also saying that he thinks “we’re gonna win this one.” And yet, he’s never voted for a clean bill himself, belongs to the party that chose the shutdown as a political strategy, and is writing op-eds for CNN bitching about Obamacare, a law the GOP can’t stop nor wish to improve.
So if you are genuinely mad about the shutdown, it may actually be wise to direct your ire to its architects rather than the alleged “pettiness of Obama.” It’s not petty when a group of hardcore ideologues take the country hostage and demand as ransom the power of your office.
As for this:
You’re only half right. It is indeed time for everyone to recognize their “dependency” upon federal activity…and stop trying to thwart it at every step of the way.
I was recently on vacation…and was in or thru 4 National Parks.
National Parks are not optional.
Cancer Research is not optional.
The Bureau of Labor Statistics is not optional.
Because JKB and Republicans have no vision, no imagination, no wisdom doesn’t make something optional.
I think another obsolete weapons system is optional, but that doesn’t necessarily make it so.
The problem we have is that half-wits have made these random baseless nonsensical judgements…and are pursuing a destructive path based on them…as if their delusions are verifiable fact…when the truth is all of their ideology and theories and myths are demonstrably false.
I’m not sure I’ve seen it put quite the pithily.
Well played, sir.
Except in the case of the restaurant, federal employees had to rent barrycades then transport them to the location of the restaurant to block off the parking lot while trying not to get hit by the passing traffic on the highway.
And there is no legit reason to ‘close the parks’. Just lock up the buildings, and put up a sign that only law enforcement are on duty until the shutdown is over.
Hey JKB…the shutdown is about denying sick people health care…not parks. Keep your eye on the ball.
So the United States government is shut down. It is essential services only. Desperate times.
And some think the most important thing is to whine about what part of a national monument is essential and what part is non.
Stepping back, that is amazing.
A total lack of rational priority.
I disagree. If something is shutdown because for it to continue appropriations are required to cover the created obligations, then one shouldn’t complain. But when activities that do not require appropriations are shutdown, then that is an arguable point. The use of scenic lookouts, etc. do not require the use of appropriated funds in the short and perhaps medium terms.
And I do accept that should the shutdown continue for a significant period, some activities that do not use appropriated funds may reach a point where they cannot continue without the obligation of appropriated funds, at which time that activity would need to be stopped as well.
The shutdown is stupid enough, going around shutting down things that don’t use appropriated funds doesn’t help that case but rather demonstrates pettiness.
SLT: It’s not an intellectually honest position.
JKB: I disagree.
So there you have it.
The best you’ve got? Monuments? We are doomed.
I hate to be the one to break it to you, but THAT’S ALMOST EVERY SINGLE THING THAT’S BEEN SHUT DOWN.
The shutdown doesn’t save money because the government’s mission doesn’t magically change. All a shutdown does is add the strain of figuring out impossible logistics onto the budget. Hell, I’ll speak for my agency. We are supposed to have ERAM testing this weekend. Can’t do it because the guys that monitor everything are furloughed. If the testing doesn’t happen soon, everyone will lose currency on the new tech and have to be retrained causing further delays and more wastes of manhours. All the budget talk in the world doesn’t make a QA guy “essential.”
The whole “essential, nonessential” thing isn’t meant to be some sort of orderly fiscal process. It’s meant to be a stop-gap for a lapse in appropriations.
@JKB: there’s a blanket order to shut down the parks. Not to carefully consider each square meter of parkland, consult with lawyers on the liabilities the government has if that spot is not shut down with the rest, etc.
You get decisions, made high up, that correctly cover 95% of the cases, enforced even in the 5% where it doesn’t make sense. That’s what a blunt, stupid policy like shutting down the government causes, even when done well.
The Office of Trivial Details was furloughed.
The idea that logistics costs money is lost on most people.
“But it costs more money…”
“No actually it costs more money to put a bunch of managers in telcons all day and point/counterpoint about what should and shouldn’t be open”
Most supervisors in the government are not very good at their jobs. The amount of detail and paperwork involved in actually being a good manager is a huge pain in the butt. Add on that contractors have to be managed differently than civil servants and it is beyond the capability of most government managers. The best ones I have seen managing contractors understand that they are customers and the contractor has better keep them happy.
@JKB: Yes, I see your quote. I’m just wondering how you can get “no interest” in ending the shutdown from some anonymous jackass’s flippant remark. Seems like you’re adding to the comment with several orders of degree.
You guys wanted the shutdown, you planned for it, you got it, and now you’re whining that you didn’t mean for it be a TOTAL shutdown, only a shutdown of those government services that you somehow think only liberal voters use. You guys are not only malevolent, but you whine while you do what you do.
So, this is not the shutdown you wanted? You wanted a very special non-shutdown shutdown?
Um, city folk ARE most Americans:
As of January 1, 2013, the United States had a total resident population of 316,789,000, making it the third-most populous country in the world. It is very urbanized, with 82% residing in cities and suburbs as of 2008 (the worldwide urban rate is 50.5%). This leaves extreme expanses of the country nearly uninhabited.
Just one more example of conservative delusion, imagining that they’re in the majority when they’re actually in the minority….
@JKB: The whole point of this tactic by the House GOP is to cause pain and pressure by shutting down as much of the government as is possible in the hopes of leveraging the situation into capitulation by the Democrats.
To pursue that line of attack, and then complain that things are shut down, is asinine. There is just no other way to put it.
It is like purposefully sticking you head in a swimming pool and then complaining that your hair is wet.
The contempt for those who live in urban areas is duly noted, although it is amusing that people like JKB may not be afraid of the dark, but rather, are afraid of dark people…
Where is the proof to support this claim? Perhaps it is, like so many things you write, simply pulled out of your ass…
@Todd: Exactly, a feature of Keynesian fiat monetary systems is that the gov’t must maintain manageable deficits to keep the non-governmental sectors awash in enough cash to facilitate economic activity. Falling deficits in lean times are stupid. It’s drinking saltwater when you are thirsty. You shrink your deficits in boom cycles to give you room to expand again when times get lean. This is why the economy has stayed “fragile” for 5 years. I didn’t design the system but if it isn’t operated like it’s designed….it ain’t gonna work right. Republican in the know understand this and will spend like crazy if ever put back in power so they can claim, they rescued the nation from the Obama economy.
Well, I have lived my entire life in a major metro area, and I go out of my way to find the darkest possible places to take my telescope to.
I know, that’s hippie science BS – of no interest to a conservative.
There is no legit reason to shut down the government. Funny how that does not bother you.
Parks are nice, but they are just not essential. This sad little bait and switch that the right wing media and their trained parrots are playing is beyond tired.