Obama administration warns of shutdown's economic impact

Posted by Kyung M. Song

WASHINGTON -- A government shutdown starting this Saturday would have immediate economic repercussions for Americans, affecting everyone from applicants for small-business loans, lower-income homebuyers to people who file their income-tax returns on paper.
That warning came from a senior Obama administration official during a Wednesday telephone conference with reporters. Unless Congressional Democrats and Republicans reach a last-minute budget compromise, some 800,000 federal employees likely will be furloughed starting this weekend, the official estimated.
Each party is attempting to deflect blame in the event that the government runs out of operating funds for the first time since 1996. A stopgap spending bill called a continuing resolution expires midnight Friday.
After that, the government must halt all operations except essential services and programs that are funded through mandatory appropriations, such as Medicare and Social Security benefits.
If the shutdown starts on a weekend, its most immediate signs would be the closure of hundreds of national parks, museums and monuments during the height of spring break. The Smithsonian in Washington, D.C., already has closed signs prepared.
But come Monday, scores of other Americans are likely to start feeling effects of the shutdown. For instance, the Small Business Administration will suspend making loans. The Internal Revenue Service will stop processing paper tax returns, which make up 30 percent of individual returns.
The Federal Housing Administration also will cease guaranteeing mortgages for low-income homebuyers. "That could have a significant impact on the housing market, which is fragile," the official said.

The federal government's two biggest operations -- the postal service and the military -- will largely escape a shutdown. But some civilian employees of the Department of Defense will be ordered to stay home.