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‘We’re in a recession, fundamentally.’ District leaders reckon with shutdown’s local impacts

Roughly one in five people employed in D.C. did not receive their full pay during the federal shutdown

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An end to the partial U.S. government shutdown is finally in sight—at least a temporary one—but the longest government closure in American history has already done major damage to the local economy. On Friday morning, D.C. government and civic leaders made that damage clear. The District’s Chief Financial Officer (CFO) told a working group assembled at the seat of the D.C. government that the shutdown has sparked an economic recession in the District.

“We’re in a recession, fundamentally,” said CFO Jeff DeWitt. “We’re effectively running in a very, very severe recession unlike any we have ever seen.” He added that about 20 percent of the people employed in the District were not receiving their full pay because of the shutdown, whether they work for the federal government or in the private and nonprofit sectors. As a comparison, D.C.’s unemployment rate was around 11 percent during the Great Recession in the aughts, DeWitt noted, warning of a possible downturn in the District’s revenue forecast.

That could happen because, over the past several weeks, local tax revenue has been trending downward while costs for District services have been trending upward. Now, with a deal to reopen the federal government for three weeks in place, D.C. will likely recoup some of those losses through reinstated income taxes, back pay for federal workers, and resumed economic activity. But there are still financial implications for the region’s tax coffers in the short term.

The shutdown will have lasted for over a month and directly affected about 145,000 people employed in the District. D.C. saw fewer restaurant sales, hotel bookings, retail sales, and parking fees, amounting to millions of dollars in lost tax revenue per week, according to a recent analysis by DeWitt’s office. The District’s overall financial health helped it weather these temporary declines in revenue and keep providing services without significant gaps.

Still, councilmembers, members of Mayor Muriel Bowser’s administration, and the CFO on Friday discussed ways to mitigate any continued economic turbulence from the shutdown.

“This is not a natural recession, this is a federal government-made recession,” said At-Large Councilmember Robert White, who suggested that the District tap into is reserves to assist struggling residents. At-Large Councilmember Elissa Silverman and Ward 6 Councilmember Charles Allen echoed that call, but DeWitt said officials have to be wary of withdrawing from the District’s limited reserves, since doing so could harm its bond rating and force tradeoffs. “We’re in a person-inducted, artificial recession,” he acknowledged, without naming names.

The CFO’s estimate of the shutdown’s fiscal impact on the District had it lasted until Feb. 15
D.C. government

In recent weeks, D.C. has taken steps to alleviate some of the shutdown’s burdens. The city has expanded mortgage- and food-assistance programs and sought to head off bankruptcy and eviction cases through legislation. How quickly economic activity gets back to normal, and whether the government will stay open beyond the three-week deal, remains to be seen.