GOP Shutdown Sells Out Small Business

Members of Congress – both Democratic and Republican – have long touted the merits of America’s small businesses. The value of small businesses as job creators and pillars of the local community are one of the few views shared by both parties. However, Republicans are demonstrating that their affection for small businesses is not deep enough to warrant any action beyond hollow rhetoric.

With the deadline to raise the debt limit looming, Republicans have been holding the economy hostage and threatening to let the nation default unless President Obama and Democrats give in to right-wing demands. In 2011, the mere threat of default caused significant damage for small businesses and the economy; an actual default – attributable solely to Republican intransigence – would be catastrophic, rivaling the 2008 economic crisis. Yet many conservatives dismiss the potential consequences of their actions, and have convinced Speaker Boehner to follow them down this perilous path.

Although Republicans have justified their opposition to the Affordable Care Act by falsely claiming that it will hurt small businesses and kill jobs, their decision to shut down the government in a desperate attempt to stop the health care law has led to actual suffering for small businesses. The Republican shutdown has created crippling uncertainty in the form of cancelled ongoing work, delayed payments, collapsed consumer confidence, and Small Business Administration loans “in limbo.” But Republicans show no signs of concern for the small business owners they purport to defend.

Business leaders helped elect Republicans in 2010 and 2012, believing that they would represent their interests in Congress. If Republicans aren’t moved to raise the debt limit by the threat of financial collapse, or to end the shutdown by children denied access to food, education, or health care, then perhaps the plight of small businesses will provide the motivation they need to end the crises they’ve manufactured.

Failure To Raise Debt Ceiling Would Have Severe Consequences For Small Businesses And The Economy At Large

Failure To Raise Debt Ceiling Could Spark “An Even Deeper Recession Than The 2008 Downturn.” According to CNNMoney, “The Treasury Department has also been sounding the warning bells about the debt ceiling. In a report Thursday, Treasury said failure to raise the limit would have a ‘catastrophic effect’ on the economy, sparking an even deeper recession than the 2008 downturn that accompanied the meltdown in financial markets.” [CNNMoney, 10/4/13]

If Debt Ceiling Is Not Raised, The U.S. Would Default, Resulting In Severe Economic Consequences For Consumers And Businesses. According to CBS news, “The U.S. also would struggle to pay the interest on its debt, including a $6 billion payout due at the end of the month. At that point, the U.S. would be in default of its obligations. The value of Treasury bonds and the dollar would nosedive. The nation’s borrowing costs would soar as anxious investors demanded a higher return to buy suddenly shaky U.S. debt. And because the interest rate on Treasuries provides a benchmark for rates on other loans, from mortgages and credit cards to car and student loans, borrowing would become far more costly for consumers and businesses. Stock markets in the U.S. and elsewhere around the world would almost certainly plunge.” [CBS News, 10/7/13]

  • Treasury Department: Default “Could Have A Catastrophic Effect On Not Just Financial Markets But Also On Job Creation, Consumer Spending And Economic Growth.” According to Bloomberg, “‘In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth — with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression,’ the Treasury said in the report.” [Bloomberg, 10/3/13]
  • Default “Would Increase The Cost Of Borrowing For All Small Business Owners.” According to Inc. Magazine, “A government default would inevitably mean higher interest rates, which would increase the cost of borrowing for all small business owners.” [Inc., 10/1/13]

Chief Economist At Moody’s Analytics: “There Is No Doubt In My Mind That A Default Would Be Cataclysmic.” According to the Associated Press, “‘There is no doubt in my mind that a default would be cataclysmic,” said Mark Zandi, chief economist at Moody’s Analytics. ‘It would cost us for generations to come because bond holders would require higher interest rates.’”[AP, 10/3/13]

In 2011, Even Threat Of Default Caused Damage To Small Businesses And The Economy

2011 Debt Ceiling Negotiations “Dramatically Slowed The Recovery.” According to the Washington Post, “The U.S. economic recovery was chugging along in the summer of 2011 when a partisan fight broke out over whether Congress would raise the federal debt limit and avoid a national default. The protracted, unsettling nature of the negotiations between the White House and Republicans dramatically slowed the recovery, economists conclude, looking back at the episode. Consumer confidence collapsed, reaching its worst level since the depths of the financial crisis. Hiring stalled, with the private sector creating jobs at its slowest pace since the economy exited the recession. The stock market plunged, sending the Standard & Poor’s 500-stock index down more than 10 percent.” [Washington Post, 1/18/13]

Because Of The 2011 Fight Over The Debt Ceiling, Consumer Confidence “Plummeted” and “Hiring Among Small Businesses Slowed.” According to CBS MoneyWatch, “There is recent precedent for such turmoil. Consumer confidence plummeted after lawmakers squared off over the debt ceiling in the summer of 2011, while the Standard & Poor’s 500 stock index dropped nearly 20 percent. Hiring among small businesses slowed. Ever after a deal was struck to raise the cap in August of that year, credit rating agency Standard & Poor’s downgraded U.S. debt for the first time ever.” [CBS MoneyWatch, 10/7/13]

  • KY Chamber Of Commerce: During Debt Debate, Small Businesses Were “Afraid To Hire, Add A New Product Line, Resume A Third Shift Of Production.” According to the Huffington Post, “‘The debt debate adds another layer of ice to a frozen situation,’ said David Adkisson, president and chief executive of the Kentucky Chamber of Commerce. ‘People are afraid to hire, add a new product line, resume a third shift of production.’” [Huffington Post, 7/30/11]

U.S. Consumer Confidence Declined Dramatically During Debt Limit Fight. According to a Bloomberg article written by economists Justin Wolfers and Betsey Stevenson, “High-frequency data on consumer confidence from the research company Gallup, based on surveys of 500 Americans daily, provide a good picture of the debt-ceiling debate’s impact (see chart). Confidence began falling right around May 11, when Boehner first announced he would not support increasing the debt limit. It went into freefall as the political stalemate worsened through July. Over the entire episode, confidence declined more than it did following the collapse of Lehman Brothers Holdings Inc. in 2008. After July 31, when the deal to break the impasse was announced, consumer confidence stabilized and began a long, slow climb that brought it back to its starting point almost a year later.” The article also included the following chart:


[Bloomberg, 5/28/12]

  • Consumer Confidence Took Months To Recover After Debt Limit Standoff Was Resolved. According to the Treasury Department, “From June to August 2011, consumer confidence fell 22 percent and business confidence fell 3 percent. Measures of both had already begun to fall earlier in 2011, in part because of developments abroad, but as the debate about the debt limit grew, these measures of confidence fell further. Moreover, it took months before confidence recovered fully, even though, in the end the debt limit stand-off was resolved.” [Treasury Department, 10/3/13]

Uncertainty Produced By Debt Ceiling Fight Caused Businesses To Hold Back On Hiring. According to a Bloomberg article written by economists Justin Wolfers and Betsey Stevenson, “Businesses were also hurt by uncertainty, which rose to record levels as measured by the number of newspaper articles mentioning the subject. This proved far more damaging than the regulatory uncertainty on which Republican criticisms of Barack Obama’s administration have focused. […] Employers held back on hiring, sapping momentum from a recovery that remains far too fragile.” [Bloomberg, 5/28/12]

Small Business Optimism Declined During Debt Ceiling Struggle. The following chart in a Treasury Department report uses data from the National Federation of Independent Business:


[U.S. Department of the Treasury, October 2013]

Kansas City Fed: 2011 Debt Ceiling Debate Caused Factory Growth To ‘Soften.’ According to USA Today, “Businesses are also feeling squeezed. Last week the Federal Reserve Bank of Kansas City’s manufacturing survey showed that after a strong rebound in June, growth among factories ranging from food processors to high-tech manufacturers to auto-parts makers softened in July. A major factor: the debt-ceiling debate. ‘The most common comment was that our customers are cautious until they have some idea of what the resolution of the debt-ceiling debate is going to be,’ says Chad Wilkerson, vice president of the Fed’s Kansas City branch.” [USA Today, 7/31/11]

After 2011 Fight, Standard & Poor’s Downgraded U.S. Credit Rating, Citing “Prolonged Controversy” Over Debt Ceiling. From a Standard & Poor’s press release: “Standard & Poor’s Ratings Services said today that it lowered its long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’. Standard & Poor’s also said that the outlook on the long-term rating is negative. […] We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade. […] The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently.” [Standard & Poor’s Release, 8/5/11]

  • Lower Credit Ratings Increase Borrowing Costs For American Businesses. According to Mother Jones, “Moody’s Investors Services, one of the ‘big three’ credit rating agencies, has placed the United States’ AAA bond rating on review for possible downgrade. The agency cited rising worries that the debt limit will not be raised in time for the government to avoid a default on its debt obligations and said that it still considers the odds of a default ‘to be low but no longer to be de minimis.’ Even a short-term default would change Moody’s outlook on the US’ ability to meet future payments, resulting in a lower rating somewhere in the AA range. This would, in turn, result in higher borrowing costs for American families and businesses, and make US investments a risky proposition for multinational companies. For the US to regain a AAA rating, Moody’s says, it would likely have to change its process for raising the debt limit, among other things.” [Mother Jones, 8/2/11]

Government Shutdown Is Hurting Small Business

Poll: 46 Percent Of Small Business Owners Say Their Business Has Been Hurt By The Shutdown, Including “Cancellation Of Ongoing Work” And “Less New Work Coming In.” According to CNNMoney, “The government shutdown has already caused some small businesses to lose work and money, according to a new CNNMoney/ survey. Of the 100 business owners who responded, 46% said their firms were feeling the impact of the shutdown, including cancellation of ongoing work and less new work coming in.” [, 10/4/13]

Small Business Administration Has Ceased Processing Regular Small-Businesses Loans, Leaving Would-Be Borrowers “In Limbo.” According to The New York Times, “For the Small Business Administration, the government shutdown is not as complete as one might think. Nearly 40 percent of the agency’s employees remain on the job, according to a shutdown plan published on the agency’s Web site. But even so, the agency has stopped processing regular small-business loans, leaving would-be borrowers in limbo.” [New York Times, 10/3/13]

  • SBA: “Due To The Government Shutdown, America’s 28 Million Small Businesses Will Be Unable To Access An Average of $96 Million In Capital” Per Day. According to ABC News, “The Small Business Administration said in a statement, ‘The Administration strongly believes that Congress should act immediately to end this shutdown and fund critical Government operations. Due to the government shutdown, America’s 28 million small businesses will be unable to access an average of $96 million in capital supported by the U.S. Small Business Administration (SBA) per day, as well as an average of $1.9 billion in capital per month,’ the SBA statement reads.” [ABC News, 10/1/13]
  • Shutdown-Created Backlog Will Already Triple Wait Time For Some Loans Once Approvals Resume. According to the Wall Street Journal, “Even if the government gets back to work this week, the SBA will face a backlog that could delay some loan approvals by six weeks or longer, compared with a normal wait time of about two weeks, said Lynn Ozer, president of SBA/government guaranteed lending at Susquehanna. The biggest waits are likely to be for loans that have to go through the standard approval process, either because they weren’t made by a “preferred lender” that can unilaterally underwrite loans or require SBA approval to waive a specific loan requirement, she said.” [Wall Street Journal, 10/7/13]

Prolonged Closure Of National Parks Could Leave Some Small Businesses In Bankruptcy. According to NBC News, “The closure of national parks from sea to shining sea isn’t just a disappointment to the millions of tourists who visit them each year. It’s also a kick in the gut for the small business owners who run the shops and kiosks that depend on the tourists to stay in business. ‘It’s a horrifying proposition,’ said Ohwnn (her full name), who runs Tours in the Glades in Florida City. The company employs four seasonal guides and one year-round guide. If Everglades National Park stays closed longer than a week it could cost her company upward of $20,000. ‘If the park stays closed, it’s bankruptcy,’ Ohwnn said. […] Hundreds of small businesses serve the 278 million visitors to the National Park System. Though each business may have only a handful of employees, if tourists can’t come to the parks because of the shutdown, those workers could be out of a job.”[, 10/3/13]

  • NPCA: Shutdown Is Costing Local Businesses Near National Parks To Lose About $30 Million Per Day. According to Stateline, “From the Grand Canyon to the Statue of Liberty, the closing of 401 national parks isn’t just disappointing campers, schoolchildren, and wedding parties. Local communities and states are losing millions of dollars in tourism and tax revenue as the federal budget impasse lingers. Visitors spend $76 million a day in communities near national parks, the National Park Service estimated before the federal government partially closed because of failed budget talks between Congress and President Obama. The last government shutdown, in 1995-96, cost local businesses near national parks $14 million per day. The National Parks Conservation Association (NPCA), an advocacy group, estimates the actual impact on businesses from the current shutdown could be closer to $30 million per day.” [, 10/6/13]

Small Businesses Near Government Buildings Are Losing Customers During The Shutdown. According to the San Francisco Chronicle, “Beyond the federal employees, hundreds of small-business people who run the coffee shops and restaurants around government buildings are already having a tough time. On Thursday, the third day of the partial government shutdown, it was like a ghost town cafe at Gateway Croissants near the massive Philip Burton Federal Building on Golden Gate Avenue in San Francisco. […] It was worse at the Coffee Smith, a two-store coffee operation that has one location near the Burton building and another inside the newer, 18-story federal building at Seventh and Mission streets. The Seventh and Mission building, which usually holds thousands of workers, now has only a couple of hundred. The Coffee Smith had to cut back its hours, from a full day’s operation to a skeleton service.” [San Francisco Chronicle, 10/3/13]

Paydays For Small Businesses With Government Contracts Are On Hold Due To The Shutdown. According to Business News Daily, “Each year, thousands of small businesses collect millions of dollars from their contract to provide products or services to the federal government. Although not all of those contractors are small businesses, on average, the U.S. government spends $1.4 billion a day on business with domestic contractors, CBS News reports. However, with the shutdown in effect, those paydays are on hold. It could get tricky for businesses that rely on these payments to manage their finances.” [, 10/4/13]

  • Washington Post: “It’s Unknown Whether Contractors Will Be Able To Pay Their Employees If The Contracts Are Put On Hold.” According to the Washington Post, “It’s unknown whether contractors will be able to pay their employees if the contracts are put on hold. ‘If your contract is non-essential, those employees may be told to go home,’ says Levinson. ‘So then the question is, does a company like Booz Allen Hamilton or SAIC still pay them? That’s up to them. Big companies probably will. For smaller companies, they may not have the cash.’” [Washington Post, 10/1/13]

Farmers Cannot Apply For USDA Loans Or Receive Government Funding During The Shutdown. According to the Associated Press, “Farmers and livestock producers use the reports put out by the National Agriculture Statistics Service to make decisions — such as how to price crops, which commodities to grow and when to sell them — as well as track cattle auction prices. Not only has the NASS stopped putting out new reports about demand and supply, exports and prices, but all websites with past information have been taken down. […] Since the U.S. Agriculture Department’s local farm services offices also have been shuttered, farmers can’t apply for new loans, sign up acreages for government programs or receive government checks for programs they’re already enrolled in.” [Associated Press, 10/7/13     

Shutdown Week Has Seen Largest Weekly Drop In Americans’ Economic Confidence Since Lehman Brothers Collapse. According to Gallup, “Americans’ confidence in the economy has deteriorated more in the past week during the partial government shutdown than in any week since Lehman Brothers collapsed on Sept. 15, 2008, which triggered a global economic crisis. Gallup’s Economic Confidence Index tumbled 12 points to -34 last week, the second-largest weekly decline since Gallup began tracking economic confidence daily in January 2008. […] While the economy is, in many respects, stronger than it was during the 2011 debt ceiling crisis, the current budget debate and government shutdown clearly show that partisan brinksmanship and the uncertainty it causes on Wall Street can negatively affect consumer confidence. Thus, Congress’ inability to reach a compromise to end the government shutdown and raise the debt ceiling could negatively affect U.S. stock prices, America’s credit rating, and, ultimately, the nation’s economic recovery.” [Gallup, 10/8/13]

Small-Business Owners’ Confidence And Hiring Expectations Are Down. According to the Los Angeles Times, “Small-business owners were more pessimistic last month about the economy’s outlook, driving down their overall optimism, the National Federation of Independent Business said Monday. The group’s Small Business Optimism Index slipped to 93.9 in September from 94.1 the previous month. The drop was driven by a big drop in confidence in the direction of the economy. The reading for expectations about business conditions in six months was minus 10% in September compared to minus 2% the previous month. […] Hiring expectations also fell, with 9% of small-business owners saying they expected to add to their payrolls. That was down from 10% the previous month.” [Los Angeles Times, 10/8/13]

Right-Leaning Business Groups Have Called On Congress To Fund The Government And Raise The Debt Ceiling

Led By U.S. Chamber Of Commerce, “Broad Coalition” Of Business Groups Signed Letter Urging Congress To Fund The Government And Raise The Debt Ceiling. According to the Huffington Post, “An unusually broad coalition of trade associations and lobbying groups, led by the powerful U.S. Chamber of Commerce, issued a letter Monday to members of Congress, urging them to fund the government and raise the nation’s debt ceiling. Coming from groups like the U.S. Chamber, which contributed millions of dollars in 2012 to help elect Republicans to Congress, the letter was a strong rebuke to the House GOP leadership. Late Monday, House Speaker John Boehner (R-Ohio) was still threatening to shut down the government unless essential provisions of the Affordable Care Act were dismantled or delayed.” [Huffington Post, 9/30/13]

  • Letter: Risks Of Shutdown And Debt Ceiling Breach Are “Not In The Best Interest Of Employers, Employees Or The American People.” According to the coalition letter to Congress, “The undersigned 251 organizations urge the House of Representatives and the United States Senate to pass a Continuing Resolution to ensure the uninterrupted funding of the federal government into the next fiscal year and to act expeditiously to raise the nation’s debt limit. We appreciate fully the importance of restraining federal spending, both discretionary spending and mandatory spending, to reduce federal budget deficits, contain the growth of federal debt, and thereby re-establish fiscal discipline in the near-term and for the long haul. However, with the U.S. economy continuing to underperform, the federal government needs to maintain its normal operations pending a successful outcome of broader budgetary reforms. It is not in the best interest of the employers, employees or the American people to risk a government shutdown that will be economically disruptive and create even more uncertainties for the U.S. economy. Likewise, we respectfully urge the Congress to raise the debt ceiling in a timely manner and remove any threat to the full faith and credit of the United States government.” [, 9/30/13]
  • Letter Was Signed By The National Federation Of Independent Business (NFIB). [, 9/30/13]

U.S. Chamber Of Commerce Fought Obamacare And Spends Heavily To Elect Republicans

U.S. Chamber “Generally Supports Republican Candidates” And Was “The Biggest Spender Among Organizations That Were Not Party Committees” In The 2010 Midterms. According to the Center for Responsive Politics, “The U.S. Chamber of Commerce is a lobbying group which represents the interests of businesses and other industry associations. During the 2010 cycle, the conservative-leaning organization spent nearly $33 million on electioneering communications, making it the biggest spender among organizations that were not national party committees. The U.S. Chamber generally supports Republican candidates or opposes Democratic candidates in its communications. Because it is a nonprofit business association organized under section 501(c)6 of the Internal Revenue Code, the Chamber does not have to disclose its donors. In the 2012 election cycle, the Chamber for the first time began sponsoring ads that overtly urge people to vote for or against a candidate, also known as ‘independent expenditures.’” [Center for Responsive Politics, accessed 10/7/13]

  • Health Insurance Industry Gave U.S. Chamber Over $100 Million To Fight Health Care Reform. According to National Journal: “The nation’s leading health insurance industry group gave more than $100 million to help fuel the U.S. Chamber of Commerce’s 2009 and 2010 efforts to defeat President Obama’s signature health care reform law, National Journal’s Influence Alley has learned. During the final push to kill the bill before its March 2010 passage, America’s Health Insurance Plans gave the chamber $16.2 million. With the $86.2 million the insurers funneled to the business lobbying powerhouse in 2009, AHIP sent the chamber a total of $102.4 million during the health care reform debate, a number that has not been reported before now. The backchannel spending allowed insurers to publicly stake out a pro-reform position while privately funding the leading anti-reform lobbying group in Washington. The chamber spent tens of millions of dollars bankrolling efforts to kill health care reform.” [, 6/13/12]
  • U.S. Chamber Spent Over $30 Million To Elect Republicans In 2012. According to the Center for Responsive Politics, in the 2012 election cycle, the U.S. Chamber of Commerce made independent expenditures totally $32,255,439. Of that total, the U.S. Chamber spent $27,912,717 against Democrats and $2,773,060 for Republicans. [Center for Responsive Politics, accessed 10/7/13]

NFIB Supports Conservative Positions And Republican Candidates

Businessweek: NFIB Supports Conservative Positions, Engages In “Small Biz-Washing.” According to Businessweek, “Does the NFIB support conservative positions? No question. It’s received $3.7 million in funding from Karl Rove’s Crossroads GPS. The NFIB also spent $3.1 million in 2010 for ‘advertising services’ with Crossroads Media, which bills itself as ‘the premier Republican media services firm.’ Does that make the NFIB a front for big business, or are conservative policies just what its small business membership wants? That’s harder to judge. The NFIB backs extending tax breaks for the wealthiest Americans, even though the bulk of those benefits would accrue to people other than small business owners, according to a nonpartisan analysis.” [Businessweek, 9/26/12]

NFIB Is More Financially Committed To Republicans Than Koch Industries, Exxon Mobil, NRA. According to the Huffington Post, “Looking at all donations since 1989, the NFIB is ranked third highest on’s list of political ‘heavy hitters,’ based on the percentage of its contributions going to Republican candidates. NFIB’s 93 percent is higher than Koch Industries with 90 percent; Exxon Mobil with 86 percent; and the National Rifle Association with 82 percent.” [Huffington Post, 9/26/12]

  • 97 Percent Of NFIB’s Direct Contributions In 2012 Cycle Went To GOP. [Center for Responsive Politics, accessed 7/2/13]