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U.S. President Barack Obama delivers remarks on the government funding impasse at M. Luis Construction, a local small business in Rockville, My. (JASON REED/REUTERS)
U.S. President Barack Obama delivers remarks on the government funding impasse at M. Luis Construction, a local small business in Rockville, My. (JASON REED/REUTERS)

Shutdown to slowdown? How Washington’s mess is hurting business Add to ...

Scott Livingston, who runs his family’s Connecticut-based manufacturing business, was fairly sanguine at first about Washington’s latest budget skirmish.

That changed when he found out about a problem with one of his company’s shipments. The client – the federal government – couldn’t receive the order because there was no one around to inspect it. The inspector was among 800,000 federal workers sent home on Tuesday after Congress failed to renew the government’s spending authority. No delivery, no money.

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“It’s frustrating that our government can’t get its act together,” said Mr. Livingston, chief executive officer of East Hartford-based Horst Engineering & Manufacturing Co., which makes component parts for aerospace, medical and technology companies. “We were just getting into a mode where we were reinvesting in the business again because we had increasing confidence.”

Mr. Livingston wasn’t the only one who initially shrugged when the U.S.’s elected representatives failed at what Democratic Senator Patty Murray called the “absolute bare minimum” of governing: keeping the lights on. Congress and President Barack Obama had gone to the fiscal brink a half dozen times since Republicans reclaimed the House of Representatives in 2010.

Stock markets rose on Tuesday, the first day of the shutdown. Social media reflected the nonchalance: Twitter buzzed with comments about the loss of the “Panda Cam” at the National Zoo trended. Marvin, a restaurant and bar in one of Washington’s hipper neighbourhoods, hosted a “Shutdown Happy Hour” that started at noon.

But with the cessation of non-essential government services now certain to extend into next week, the light-hearted Happy Hours are giving way to more sober offerings, such as discounted lunches for federal workers. On Thursday, a Lutheran church located eight blocks north of the White House invited locals to attend a “Partial Shutdown Night Prayer.” The panda jokes have subsided, replaced by laments about how the shutdown kept the Labour Department from publishing its monthly jobs report on Friday.

President Obama cancelled plans to attend summits in Asia next week, a setback to negotiations aimed at completing a trade agreement between the United States, Canada, Japan, Vietnam and other Pacific nations by the end of the year. The Standard & Poor’s 500 index finished the week barely changed.

None of this is a good omen for the deadline that really matters: Oct. 17, when the Treasury says it will run out of ways to pay the country’s bills unless the legislated debt ceiling is raised.

Reports toward the end of the week that House Speaker John Boehner has been telling fellow Republicans that he won’t allow that to happen eased anxiety somewhat, and almost all economists agree that a shutdown that lasts even a couple of weeks would be more like a bruise to the economy than a body blow. But that is mostly a mathematical calculation. Harder to measure is the impact Washington’s chronic dysfunction is having on the animal spirits that drive the world’s largest economy.

At a minimum, politics is throwing sand in the gears at a moment when the U.S. is struggling to reach highway speed. The economy is getting close to where it was before the financial crisis. Companies are profitable and are hiring again, if only slowly. The problem is the next phase in the recovery will require a leap of faith: investment. And it takes a bold executive to commit money over the longer term when he or she has no idea what tax or regulation Washington might change and politicians insist on a brinksmanship approach to budgeting.

“We’re looking at several substantial investment opportunities,” said William Marsh, who owns American Bar Products Inc., a maker of cold-finished metal bars near Philadelphia.

“In what would normally be an incredibly easy time to make a decision and pull the trigger instead is very difficult,” Mr. Marsh said, citing the uncertainty over future tax rates.

Business uncertainty

In September, Mr. Boehner floated an idea that would have avoided a showdown over keeping the government open. The Tea Party faction of his caucus rejected it as too wishy-washy. These lawmakers were intent on upending the Affordable Care Act, Mr. Obama’s 2010 law designed to make health insurance more accessible for those unemployed or working in jobs with few benefits.

Mr. Obama won a second term defending his bid to extend health benefits, and the Supreme Court rejected a challenge to its constitutionality. Tea Party Republicans were determined to attack it anyway and decided they would do so by using the budget and debt-ceiling deadlines as leverage. Mr. Boehner, so far, has sided with them because he otherwise would need Democratic support to legislate.

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