Much has been said of the potential negative economic impact of the federal government shutdown. Market watchers suggest a 0.2% to 0.4% hit to the fourth quarter GDP, with some hope the economic activity lost would be made up in the first quarter of 2014.
The National Retail Federation issued on Thursday (Oct. 3) its expectations for a solid holiday season with sales expected to top $602.1 billion, up 3.9% from last year. However, the federation also said a prolonged shutdown in government operations, or worse yet, Washington's inability to quickly reach compromise on the debt ceiling could derail those holiday expectations, said NRF chief economist Jack Kleinhenz, during a media conference call on Thursday (Oct. 1).
“Our forecast is a realistic look at where we are right now in this economy – balancing continued uncertainty in Washington and an economy that has been teetering on incremental growth for years,” said NRF President and CEO Matthew Shay. “Overall, retailers are optimistic for the 2013 holiday season, hoping political debates over government spending and the debt ceiling do not erase any economic progress we’ve already made.”
“Our forecast is also somewhat hinging on Congress and the Administration’s actions over the next 45 days; without action, we face the potential of losing the faith Americans have in their leaders, and the pursuant decrease in consumer confidence," Shay said.
He said over the past year the NRF has survey consumers time again dating back to the fiscal cliff issue and found that 70% to 80% of consumers surveyed consistently said that the state of the economy greatly weighs on their spending decisions.
Northwest Arkansas' economy is closely tied to retail, given Wal-Mart's presence there as well as the near 4,000 supplier-related jobs. The holiday season comprises anywhere from 20% to 40% of a retailer's total annual sales. Experts said if the shutdown drags on more than a week or so and the debt ceiling issue stalls, this holiday season might not be as merry.
The City Wire on Thursday surveyed several business leaders around the state. Following are the questions and their responses.
Q: Do you believe the shutdown will have a negative impact on your metro area economy? If so, in what area(s) are you most concerned will be hurt?
“Anytime 800,000 people are suddenly plunged into unemployment, the economy is dramatically affected,” Lane Kidd, executive director of the Arkansas Trucking Association
Sam T. Sicard, president and CEO, Fort Smith-based First Bank Corp.: “What I am most concerned with are the dedicated workers at the Guard and other government funded occupations who are being furloughed and not being compensated. From a direct economic perspective, obviously their delayed or lost compensation will negatively impact local businesses due to less consumer spending in our economy. From a broader perspective, I believe the shutdown will also lower spending of other families in our community out of fear of the future. I also believe this negatively impacts business investment, as businesses become concerned with future uncertainties of what Congress will do next and whether our country can intelligently govern itself.”
Jeff Amerine, technology licensing officer, University of Arkansas: “At this point it is difficult for me to clearly assess the impact as it relates to the startup/venture community in Arkansas. Clearly if the shutdown goes on for long, the impacts will inevitably grow because the economy is driven good or bad by the balance between confidence and uncertainty. Even if the actual impacts of an extended shutdown are low, confidence in the overall economy will erode as this morass continues. Let's hope cooler heads prevail soon.”
“I think we are in a much better position in Northwest Arkansas to avoid any short term issues, however the cost of Obamacare is much more scary to me,” Gary Head, CEO of Signature Bank of Arkansas
“What goes down, goes back up by the same amount after the crisis ends, so net-net, we’ll be in the same place,” Dan Sanker, CEO of CaseStack
Dave Hughes, executive director, Greater Fort Smith Association of Home Builders: “I'm very pro-business, small government, so my responses are skewed toward that bias. Regarding economic impact, the suspension of pay for federal workers could have, if protracted, a significant negative impact on the economy. Of more importance will be how Congress handles the debt ceiling deadline October 17th. If the stalemate continues, it could have a local impact, but it would probably take until mid 2014 for it reach here.”
Q: Who do you most blame for the shutdown?
“Politics caused the shutdown. Chicago style politics, unlike Chicago style pizza, is very unappetizing.” – Dave Hughes
Sam Sicard: “There is plenty of blame to go around for the shutdown. What I have learned in business and organizational leadership is that when blame is not shared, problems don't get solved. I believe, as Americans, the only way we get our government to govern responsibly and quit governing by self-imposed crisis after crisis is we all share in the blame. Perhaps we have been at fault for prioritizing our personal interests over the interests of our country. Perhaps we are to blame because we have done nothing but complain about our federal government, without actually trying to make a difference. The failure of our country to responsibly govern itself through our representative democracy is an opportunity for us to reflect on where we are as a country, how we got here, and what we have to do to change directions. I hope we can learn from this, and if not, maybe our country's children will.”
Jeff Amerine: “I'd say our politicians are a reflection of America. Someone once said ‘we always get the government we deserve.’ If we don't like the current situation, we are all obligated to be informed citizenry and vote whenever the opportunity presents itself.”
Jennifer Parks, Fort Smith-based HealthPointe Insurance Services: “Both parties. However the egos are going to have to go. It seems that most of our elected representatives lose grasp on reality when they get to Washington.”
“Those factions within the House of Representatives that linked approving the federal budget to delaying the start of the health insurance exchanges.” – Lane Kidd
“The system.” – Dan Sanker
Q: The next potential gridlock in Washington could be over the debt ceiling. What would be your advice to Arkansas’ Congressional delegation on how to handle the expected need to raise the federal debt ceiling?
“Listen to your constituents and shrink our government.” – Gary Head
“Let’s be realistic. They have commitments. Their decisions are made.” – Dan Sanker
Jennifer Parks: “Quit spending money! This cannot continue. Sacrifices are going to have to be made. They MUST keep a balanced budget for the country much the same as they would for their own family. Not many of us could keep our nice, comfy lives if we did not pay our creditors. I am very concerned for our children and what the future will hold. We are losing producers (taxpayers) and putting more and more people on government assistance.”
Jeff Amerine: “It is hard to argue with the desire to control spending and to manage to a budget versus a continuously rolling bow wave of CRs. The current approach is indefensible. I'd like to see a rational plan that reduces the debt and the deficit. We simply cannot continue to spend beyond our means. I hope that both parties can figure out how to work together to develop a consensus approach that gets the country on that path.”
Sam Sicard: “My advice to my Congressman is to raise the debt ceiling. I have no objection to trying to get additional spending cuts for increasing the debt ceiling, particularly if spending cuts come from our completely out-of-control entitlement programs, but not raising the debt ceiling could be an absolute economic and fiscal disaster for our country. If we don't raise the debt ceiling, this puts us at risk of defaulting on our debts and putting us back in a deep recession with millions of lost jobs. From a fiscal standpoint, this puts us at risk of drastically raising the interest rates on the existing $16.7 trillion in federal debt we owe. We can't afford to do this with how much we already owe. The negative economic impact from the government shutdown will pale in comparison to a failure to raise the debt ceiling.”
“Voting to increase the debt ceiling will not increase future government spending but rather authorize payments of debts already incurred, so the delegation should vote to support raising the debt ceiling.” – Lane Kidd
Q: Please feel free to offer any other thoughts on the relationship between federal government actions and the regional economy.
“‘We the people’ get what we vote for.” – Dan Sanker
“Again, it's about the debt. The federal government hurts everyone in the country with the way they have mismanaged our money.” – Jennifer Parks
“The best thing we can do locally is to monitor the situation but not be paralyzed by it. We need to keep doing what we do best by running great businesses and creating new enterprises that can and will change the world.” – Jeff Amerine
Sam Sicard: “I just want to add that I support my Congressman, Steve Womack. While I may not agree with his position on absolutely every issue, I know that he is smart, hard working, loves his country and is trying to do what is best for our State and our community. It is easy to just blame everyone in Congress for our political dysfunction and assume they all don't really care. Maybe some don't, but I know he does care, and I know he did not want our government to shutdown and thousands of Arkansans to be furloughed. He is facing some difficult decisions on how to vote to get us out of the shutdown and avoid defaulting on our debt, avoid raising the interest on our debt, and avoiding putting our economy back in a recession from yet another self-inflicted wound. I know that however he votes, he will vote based on what he believes is best for our country.”