NC Budget and Tax Center

Few workers have enough savings to withstand a long-term government shutdown

The shutdown of the federal government is having a detrimental impact on employees who are either furloughed or who are working without pay. Last Friday marked the first full pay period some employees went without a paycheck, and while their pay may be on hold, their bills certainly are not.

Workers are still expected to pay rent, families are still expected to pay for childcare, and recent graduates are still expected to pay their student loans.

Unfortunately, far too few Americans actually have enough savings to go for weeks, let along an entire month, without pay. When the Federal Reserve’s Survey on Consumer Finances asked families how they would deal with a hypothetical income shortfall, 58 percent of families said they would draw from savings and investments, while only 21 percent responded that they would need to borrow money. But when families who actually faced income shortfalls reported how they made ends meet, only 44 percent were able to pull from savings while 43 percent of families had to borrow money, including taking on credit card debt.

The reality is that nearly 30 percent of all of households, regardless of income, have less than $1,000 in savings. Most Americans are ill prepared to handle a financial emergency such as an illness, job loss, or, in this case, a government shutdown.

According to The Center for Enterprise and Development, more than 25 percent of North Carolinians are asset poor, and more than half (51.5 percent) of all North Carolinians are “liquid asset poor,” meaning they do not have enough cash savings for a safety net in case of a family emergency.

Middle-income, not just low-wage workers, are at risk of running through their savings and going into debt to weather the shutdown. The Survey on Consumer Science finds that the typical worker who earns between $45,000 and $70,000 each year has $2,200 in savings. While this may be enough to pay for a car repair or an unexpected home expense, it is not nearly enough to cover everyday expenses. According to the Living Income Standard, a family with just one adult and one child incurs at least $3,000 in expenses each month. Families with multiple children who live in high-costs counties or who earn lower wages face even larger challenges.

Workers who earn between $25,000 and $45,000 a year typically have $1,500 in savings, and most families who earn even less have $500 or less in case of emergency.

Even in households with middle class income, the government shutdown is having a disproportionate effect on households of color.

The Survey of Consumer Finance demonstrated that even within income brackets, there are still disparities in which families have access to an adequate amount of savings. When households were asked if they could borrow $3,000 from friends or family in case of emergency, only 43 and 49 percent of Black and Hispanic households answered “yes” while 71 percent of white households reported they could.

This points to the long-term effects of occupational and educational segregation, wealth inequality, discrimination in the workplace and financial institutions, and other factors. Although Black and Brown families may have similar incomes to their white counterparts, they often pay more for access to capital through loans, are less likely to receive intergenerational wealth transfers to avoid costs such as mortgage insurance, and are more likely to provide ongoing financial support to family members who earn less.

While there are many factors that result in different liquid asset rates for families along lines of race and ethnicity, the end result is that the combination of the government shutdown and a lack of income can easily push families into long-term debt situations — and even out of the middle class altogether.

Ending the shutdown is the only way to ensure that these workers and their families do not suffer from a lifetime of financial burdens as a result of the President’s obsessive pursuit of a racist and xenophobic immigration policy.

NC Budget and Tax Center

Trump Administration admits economic damage of shutdown more than twice what originally claimed

Image: Adobe Stock

Kevin Hassett is the chairman of the White House Council of Economic Advisors, a group that is supposed to inject reason and rigor into the administration’s economic worldview. On Tuesday, he admitted that the shutdown is inflicting more than twice the damage on the economy than the President’s economic advisors had previously claimed, and even Hassett’s new estimate still fails to face the true economic bill that Trump’s shutdown is running up.

“We’ve been watching the actual effects, and noticing that the impact we see on government contractors is bigger than the sort of staff rule-of-thumb anticipated.”

This simple quote is revealing in a number of ways.

Hassett and his team weren’t just a little off — they weren’t even in the neighborhood of the right ballpark. The Council of Economic Advisors now admits that the economic damage is likely to be worse every week than what they had originally claimed would take two weeks to occur. We all make mistakes, but for a group whose core mission is to generate reliable economic estimates, that’s a big error.

Hassett’s language also reveals a lack of planning and forethought within the Administration. The choice to close government appears to have considered little more than “staff rule-of-thumb”, rather than a serious attempt to predict the economic consequences that would come from it. Partially shutting down a big chunk of our government is not rule-of-thumb stuff — it’s a major decision that should never be taken lightly.

The same lack of serious thought was also on display a few days ago, when Hassett opined that federal employees should be delighted that they’re getting a free vacation (quote begins around the 4:30 mark in this video), and that “in some sense they’re better off”.

Even now, the Trump administration still hasn’t fully grappled with the economic injury it is inflicting on our country. With the Federal Government partially incapacitated, key vertebra in America’s economic backbone are suddenly missing. Beyond federal contractors and employees not getting paid, a host of vital economic services are going undelivered. As we have covered before, home loans are not being underwritten, businesses can’t get advice in preparing their taxes, farmers are missing out on crop reimbursements, environmental permitting is not happening, and even breweries can’t get their spring drafts approved. The President’s economic advisors have not released any rigorous analysis of how the failure to discharge these critical functions could undermine our economy, so even the new estimates that Hassett revealed this week are likely to prove an inadequate assessment.

Concerns about undermining growth are particularly pressing given the range of risks currently facing the global economy. We’ve had a long run of steady economic growth, but the list of risk factors that could derail that record are growing. Against that backdrop, it is all the more incumbent on the Administration to consider all of the ramifications of their policy choices.

Trump’s advisors may not have adequately foretold what would come from shuttering the people’s government, but the real-world consequences of the President’s decision become clearer by the day.

agriculture, NC Budget and Tax Center

Schools are concerned over shutdown’s impact on meal programs

Amid the longest government shutdown in United States history, many school systems are concerned with their ability to receive reimbursements for their free and reduced priced meal programs. North Carolina’s school nutrition programs are a critical tool in the fight to end childhood hunger for students across the state, serving more than one million students breakfast or lunch at school each day.

In Vance County, school officials continue to serve breakfast and lunch, but have taken steps to prepare for the long-term impacts by restricting the portions of food students are receiving. According to a letter written by the United States Department of Agriculture (USDA), the Food and Nutrition Services (FNS) has secured additional funding which “can support program operations at normal levels well into March.”

At the moment, there is no reason for school districts to take the drastic step of stopping or changing students’ food and meals. There are also other methods school districts can utilize to fund meals if the government does not open in time, such as the state’s ability to draw on their reserves or rainy day funds.The NC Department of Public Instruction (DPI) plans to keep school officials informed as the shutdown continues.

For Additional Information please reference:

NC Budget and Tax Center

Federal shutdown is affecting family-run businesses in N.C.

The ripple effects of the federal shutdown are being felt by family-run businesses in North Carolina, according to an article on Friday by Paul B. Johnson of the High Point Enterprise.

Nick Owens and employees at his family-run business are having to turn away customers through no fault of their own because of a ripple effect of the federal government shutdown.

Lanier’s Super Market in Davidson County accepts food stamps from customers to pay for groceries. But the store in Denton is among businesses across the Piedmont, state and nation caught in limbo because their permits to accept food stamps are on hold due to the shutdown.

“Our customers haven’t been able to use food stamps with us since right after Christmas,” Owens said.

Lanier’s Super Market and other grocers were on a schedule to have their food stamp sale permits renewed in late December or January. But the U.S. Department of Agriculture can’t renew licenses now because of the stalemate from the shutdown.

The article points out that more than 2,500 grocery stores and food retailers across the United States haven’t been able to renew their food stamp sale permits since the shutdown began. That total includes 158 businesses in North Carolina. Read more

NC Budget and Tax Center

Government shutdown is harming N.C.’s food retailers and the families that depend on them

The effects of the partial federal government shutdown are wide reaching. The shutdown, which is now in its 18th day, impacts federal agencies responsible for providing critical assistance to millions of North Carolinas. In particular, the nation’s food assistance program, the Supplemental Nutrition Assistance Program (SNAP, formally known as food stamps) is at risk both in the near and longer term should the shutdown continue. The shutdown highlights the critical role that federal food assistance plays not just in people’s households but in communities at large.

Across the nation, more than 2,500 grocery stores and retailers are unable to accept SNAP benefits as a result of the shutdown due to their inability to renew their permits to accept food assistance benefits during the shutdown.

To view an interactive map of these locations and find out more, visit ncjustice.org/hunger

Retailers in North Carolina are disproportionately impacted. According to the USDA, 158 retailers and grocers in the state are no longer able to accept food assistance from families in need.  These retailers are providing food access to families across the state, and many are in areas that lack many options for families to secure food for their table.

This disruption in retailer’s abilities to accept SNAP has far-reaching consequences. Nearly two-thirds of households that receive SNAP are families with children, and almost a third are families with members who are elderly or have disabilities. And while more than 42 percent of SNAP families are employed, many of those still rely on food assistance to make up for low wages and unpredictable work schedules.

A disruption in the ability of families to access foods, no matter how short or small, means that the North Carolinians who need help the most are the ones bearing the burden of this government shutdown.

Families in need are not the only ones affected. Last year, SNAP was responsible for bringing in $2.14 billion into the North Carolina economy through local retailers and grocery stores. These businesses, especially in rural and low-income communities, are vital employers. This government shutdown impacts their bottom lines, making it harder for them to employ their workers.

The ripple effects of the shutdown will continue to affect our communities across North Carolina. The multiple harms caused by this shutdown highlight the critical role that the federal government plays in the everyday lives of every American.