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The Real-Life Impact of the GOP’s Shutdown & Default Plan

The Republican Party’s plan to shut down the government and default on our obligations unless ObamaCare is gutted would have a devastating impact on ordinary Americans and the overall economy.

For our soldiers, a government shutdown would mean being required to report for duty, but not getting paid. Some Social Security benefits for seniors “could be delay[ed] and new claims may be not be processed.” For small business owners, a government shutdown poses a real threat as it would likely mean small business loan applications would not materialize. Lifesaving clinical trials at the National Institute of Health could turn new patients away. According to The Denver Post, long term flood recovery efforts could be jeopardized too.

A shutdown would be devastating for ordinary Americans from military families and seniors to small business owners and sick people in need of health care. But the GOP’s recklessness doesn’t end there.  They are willing to go further, forcing a default on our nation’s obligations trying to stop ObamaCare.

Mark Zandi, former economic advisor for John McCain’s Presidential Campaign has said that a default over the debt limit would cause a severe recession and U.S. Chamber of Commerce President Thomas Donohue said “it is insane not to raise the debt ceiling.”

See below for select stories on the real life impact of the GOP’s shutdown-default gambit:

Defense firms brace for shutdown
Politico // Leigh Munsil

The threat of a federal government shutdown is even more bad news for a defense industry struggling to weather sequestration. Following a summer of Pentagon furloughs and with other sequestration cuts starting to sink in, the government — caught between a gridlocked Congress and a dug-in White House — is marching to the brink of a complete halt, which industry sources say could do irreparable damage to defense firms. “A shutdown means that there’s no additional funding that is made available for contracts,” said Elizabeth Ferrell, a partner at McKenna Long & Aldridge who’s worked in government contracts law for more than 30 years.

No mid-Oct. paycheck for troops if government shuts down, lawmaker says
Navy Times // Rick Maze

With one week to go before a potential partial government shutdown, a key Republican lawmaker is warning troops to be financially prepared for the possibility of not getting a mid-October paycheck. Rep. C.W. “Bill” Young, R-Fla., chairman of the House defense appropriations subcommittee, warns that the troops’ morale and readiness will suffer even though the Defense Department does not shut down when its funding stops. “All military personnel will continue to serve and accrue pay, but will not actually be paid until appropriations are available,” Young said. The mid-month payday would be the first in jeopardy. Additionally, he said most travel and permanent change of station moves “would be delayed or canceled” and benefits for line-of-duty deaths also would be suspended. Military hospitals and clinics will remain open but would scale back on operations, “impacting routine medical and dental procedures,” Young said. He did not specifically mention any impact on Tricare health insurance benefits, but in past government shutdowns, payments to medical providers were delayed but treatment was still available.

U.S. Stocks at Risk With Government Shutdown Looming
Bloomberg // Mike Dorning

Even as the U.S. stock market roars to new highs, helped last week by the Federal Reserve, a risk is rising from another corner of Washington.  Hardening positions on the federal budget and borrowing limit, and recent political setbacks suffered by both President Barack Obama and Republican congressional leaders as they go into the fight, are raising the odds of a government shutdown, debt default or near-miss that could roil equities markets. “We are in for another ugly confrontation,” said Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $40 billion. “Even though everyone knows the impasse will be short-lived, it is a sad reminder of how dysfunctional Washington has become. It will be a catalyst for taking profits after the recent run-up.”  Forty percent of global investors surveyed in a Sept. 10 Bloomberg poll said they would pull back on U.S. markets in the event of a government shutdown, which many economists say would be less damaging than a debt default.  “This is a sleeper issue right now, but it could really come to the fore,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. “There is a risk of the stock market selling off a thousand points over two or three days.”

Impact of government shutdown on federal flood relief in Colorado unclear
The Denver Post // Allison Sherry

Longer term recovery efforts, however, staffed by full-time FEMA employees could be affected. All of Colorado's Republicans say they don't want a government shutdown, arguing it would be bad for the economy and the state. They stopped short of saying what they will do, however, next week when the Senate likely sends them back a "clean" funding measure that doesn't touch the Affordable Care Act.

US regulators warn of delays, weaker oversight if federal shutdown takes place
Platts // Bobby McMahon

US natural gas industry officials and regulators expressed concern Friday that a prospective October 1 federal government shutdown would delay the review and permitting for key projects while hamstringing agencies' ability to police the energy markets. "Taking our cops off the beat for even a few days could have disastrous impacts on these markets that consumers depend on," US Commodity Futures Trading Commission member Bart Chilton said Friday.  "Under a shutdown scenario, government regulators will be handcuffed in our ability to go after crooks who are trying to evade oversight and protection of markets," Chilton said. "You can bet the 'do-badders' are licking their chops."

How a Government Shutdown Could Affect the Economy
CNN Money // Jessiva Dabrowski

The last time there was a shutdown that long was at the end of 1995, when the government was shut down twice for nearly four weeks combined. The CBO estimated those shutdowns shaved only about half a percentage point off growth in the fourth quarter of that year. Zandi said he is assuming a greater hit this time for two reasons. The first is timing: The 1995 shutdowns started in the second half of the quarter. This time, if Congress fails to pass a funding bill, the shutdown will begin on Oct. 1, the start of a new quarter.

Five Real Impacts of a Government Shutdown
ABC // Elizabeth Hartfield

One department where workers would likely have to hunker down while the shutdown plays out is the Small Business Administration, which, among other things, approves applications for loans to small businesses. These services would probably be suspended in a shutdown and depending on how long the last shutdown lasted, applications could get backlogged, meaning the impact could be felt even after the government reopens.

Md. comptroller on government shutdown: 'It could have a devastating impact'
WUSA9 // Jessica Doyle

If the government shuts down, then impact could hurt local economies. WUSA 9's Jessica Doyle asked Maryland's comptroller, Peter Franchot, what he's expecting. "Well, it could have a devastating impact because Maryland is a rich state. We're a great economy but we're joined at the hip to the federal government. Almost a third of all the economic activity in the state is attributable to the proximity to the federal government, so that's a huge problem for us and we desperately hope that the powers that be in Washington will work things out.  "Even if they don't, we have a real middle class employment and wage situation in Maryland," said Franchot. They wrote down the withholding estimate for next year by $324 million. Franchot explained why that is important: "Those are middle class receipts coming in, and boy, it means we have an employment problem and we also have a wage growth problem." One way he's looking at making adjustments is by calling for fiscal prudence going forward. What is that going the mean for the state of Maryland?

Shutdown would delay military pay
Politico // Kate Brannen

The armed forces and their families are once again facing the possibility of delayed paychecks. If Congress and the White House can’t reach a spending deal by the end of the fiscal year on Sept. 30, members of the military would be expected to work during the shutdown, but would not get paid until the issues are resolved.

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