With the clock ticking towards a September 30 deadline for Congress to pass a new spending package, Arizona’s business community is growing increasingly concerned about the potential consequences of a government shutdown. Leadership from the Arizona Chamber of Commerce & Industry is sounding the alarm over the disruption such an event could cause to the state’s economy.
A government shutdown would not only impact federal workers but also send shockwaves through the state, affecting industries ranging from tourism to manufacturing.
The Chamber cites among its concerns the potential closure of national parks and monuments, which could severely disrupt the state’s vibrant tourism industry.
Tourists flock to iconic Arizona destinations such as the Grand Canyon, Petrified Forest, and Saguaro National Park, contributing significantly to the state’s economy.
Gov. Katie Hobbs, who is leading a delegation to Taiwan this week, posted a message on X, formerly known as Twitter, that “The Grand Canyon is a pillar of our state and provides good-paying jobs for hundreds of Arizonans. In case of a government shutdown, the State of Arizona is prepared to make resources available to keep the park open and guarantee our residents and visitors are protected from Washington’s failures.”
Arizona Chamber President and CEO Danny Seiden applauded the governor’s announcement.
“Good for Gov. Hobbs making clear that her administration will step in to ensure that one of the seven natural wonders of the world won’t close,” he said. “But the state can only do so much, and Arizona has other national parks that, if they close, will likely lose visitors, while businesses that rely on tourism will lose revenue.”
Air travel could become even more of a hassle. With fewer TSA agents and air traffic controllers on duty, travelers could face long delays and operational challenges, causing headaches for both business and leisure travelers.
Government contractors are also at risk of being furloughed if Congress fails to pass a spending package. These contractors, who provide essential services to various federal agencies, would suffer financial hardship during a shutdown, which could have a ripple effect on other local businesses that rely on their services.
“I’m very concerned about the effect of a shutdown on Arizona firms that hold government contracts,” Seiden said. “In many cases, they won’t get paid. The longer a shutdown drags on, the more difficult the decisions become for employers who do business with the government.”
Border trade and security is another crucial concern for Arizona, given its proximity to the U.S.-Mexico border. Customs and Border Protection officers and Border Patrol agents would work without pay during a shutdown, likely inflicting a hit on agency morale.
In testimony earlier this month before a subcommittee of the Senate Homeland Security and Governmental Affairs Committee, Matthew Davies, CBP’s executive director for admissibility and passenger programs, said that a government shutdown would negatively affect agencies’ recruitment and retention.
“We would continue to come into work and secure our border at our ports of entry, but for officers especially over a long period of time not having a paycheck to go home to, is extremely demoralizing and debilitating,” he said.
Additionally, credit rating agencies could view a government shutdown as further evidence that Congress is unable to effectively govern and manage the country’s finances. This perception could negatively impact the nation’s credit ratings and increase borrowing costs for both the public and private sectors.
The credit ratings agency Fitch in August downgraded the country’s credit rating following the protracted debate over whether to raise the debt ceiling, in part due to “the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”
“House Speaker Kevin McCarthy said that ‘Nobody wins in a government shutdown,’” Seiden said. “He’s right. There are political consequences and there are economic ones. Washington needs to get its act together fast.”
Seiden led a delegation of Chamber members to Washington this week where he stressed to officials on Capitol Hill the importance of avoiding a shutdown.
With the fiscal year ending September 30, there is no time for both chambers of Congress and the White House to negotiate a spending package for the entire fiscal year 2024 that begins October 1.
Congress’ only option at this late stage is to buy itself some time for further negotiation through passage of a continuing resolution, or a CR, which maintains spending levels at their current level for an agreed upon period while negotiations between the executive and legislative branches continue. There is no interruption in government operations during a CR.