Oct. 08--The economies of 15 Republican-leaning states would be among the 25 most hard hit by a prolonged shutdown that leads to a lapse in payment of benefits for seniors, veterans, students and other citizens later this month, according to a new web-based study released Tuesday.
WalletHub, a personal finance social network, found that such red or Republican-leaning states as Alabama, Alaska, Idaho, South Dakota, Utah, Arizona and Montana are highly vulnerable either because of the high concentration of federal employees and contractors or the large number of seniors and other groups who disproportionately benefit from government aid.
The first week of the shutdown walloped the local economies of Virginia, Maryland and the District more than most other regions because the area has the highest concentration of federal employees and contractors who were let go or sent home because of the impasse over spending.
But if the shutdown is prolonged into next week or even next month, as is increasingly predicted, after the Treasury runs out of borrowing authority on Oct. 17, a far broader swath of the public is at risk of losing income and benefits that many depend on to get by day to day.
"It's interesting to note that Republican-leaning states stand to suffer the most," said Odysseas Papadimitriou, chief executive of the WalletHub and CardHub web sites. "From senior citizens and veterans who aren't getting their Social Security and VA checks to students and small business owners whose loan applications go unfulfilled, there will be plenty of angry constituents for politicians to answer to."
The looming lapse in borrowing authority threatens all citizens, not just the federal bureaucracy, because the Treasury won't have enough cash on hand to pay all the benefits and bills coming due after Oct. 17. A particularly big chunk of Social Security and Medicare benefits is due early in November, and the Treasury is unlikely to have enough cash to pay them all unless Congress and the Obama administration reach a deal.
"Let's just hope politicians get the message before we set the economic recovery back too far or allow partisan politics to ruin America's good name with investors worldwide," said Mr.Papadimitriou, reflecting the sentiments of many businessmen who are apprehensive about the effects of an extended shutdown on the economy and global markets.
Small businessmen, many of whom get loans from the government under programs that were closed down last week, are getting more anxious about the economy, according to a National Federation of Independent Business survey released Tuesday
Optimism among small businesses inched down in the September survey, while the share of businesses than planned to hire new employees fell to 9 percent.
"In September, small business owners were already worried about the economic outlook. The government shutdown and the impending debt ceiling crisis are likely to send small business optimism deep into recession territory," said Ozlem Yaylaci, senior U.S. economist at IHS Global Insight.
As the shutdown grinds on, businesses in the Washington area are starting to feel real pain, according to the Greater Washington Board of Trade.
"This second week will bring things from inconvenient and difficult -- to painful and, in some cases, untenable," especially for federal contractors struggling with the extended shutdown, said board President James C. Dinegar.
"Business leaders aren't sitting on their hands," he said. "They know this is likely to be an extended shutdown, and they're doing everything they can to quickly readjust their teams and re-prioritize operations."
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Original headline: Survey: Red states to suffer most in prolonged shutdown
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