Navigating Uncertain Waters: Delving into the Impact of a Potential Government Shutdown

A Closer Look at How the Looming Shutdown Will Impact the Travel and Tourism Industry

As of today, there is still no agreement on funding the government beyond the end of September. While a federal shutdown even as short as a few days will significantly affect federal employees, protracted shutdowns have ripple effects that can have medium- and long-term effects on local and state governments as well as private and nonprofit sectors. 

The State of Play

Party disagreements and priorities are a normal part of legislating in a divided Congress, but conservative voices in the House have blockaded many of the usual pathways to compromise, significantly increasing the likelihood of a shutdown at the end of September.

As pressure mounts, House Speaker Kevin McCarthy (R-Calif.) is faced with a difficult decision: agree to the demands of the most conservative members of his caucus, or work with moderate Republicans and Democrats to avert a shutdown – and risk his speakership in the process.

The Backstory

Conservatives are not happy about the debt ceiling agreement that was crafted by President Biden and Speaker McCarthy in June. McCarthy allies, establishment Republicans – including Senate Minority Leader Mitch McConnell (R-Ky.) – as well as Democratic Congressional leadership continue to support the accord.

This has set up a sizable gulf between the House and Senate Appropriations bills, which sets up a conflict later in the year, but the short-term conflict will be finding agreement to pass a “continuing resolution” (or CR) that will temporarily fund the government while a longer-term agreement is hammered out.

In addition to the fiscal gulf, there’s a social one. House Republicans have attached dozens of social issue riders to unrelated bills, especially on abortion, transgender and LGBTQ+ rights.

The Friction

This is where we find ourselves this month. House conservatives are demanding a seemingly ever-changing range of concessions to support a short-term CR and a smaller cohort are flatly refusing to consider a CR.

What Happens Next

If no agreement is made before Sept. 30 at midnight, the bulk of the federal government will shut down. Essential functions, like air traffic control, federal law enforcement and veterans’ hospitals, will continue to operate, although many of those employees will go without pay until an agreement is struck.

The last government shutdown occurred in 2018-19 and lasted for 35 days. This shutdown led to a slowdown in economic activity and overall production across all industries, having a wide impact on the economy beyond a government lens.

Here’s a look at the potential practical impacts for the travel and tourism industry:

A government shutdown presents significant threats to the travel and tourism industry.

A recent study by U.S. Travel estimates the combined effects of the shuttering of federal tourism destinations (e.g., national parks, museums), coupled with declines in government-related travel and transportation-specific (air and rail) impacts to be around $140 million per day.

The same study estimates a monthlong shutdown would result in economic losses of $4.2 billion and a direct spending loss of $1.9 billion.

In addition to the economic impact of a shutdown, there are practical impacts that start on day 1 of a shutdown. 

• Critical travel industry functions will continue, including essential workers at the Federal Aviation Administration (air traffic controllers), the Transportation Security Administration (TSA), and Customs and Border Protection (CBP).

• These essential workers could still be officially working without pay, however. 

• It’s important to note that Congress has never reneged on its obligations to provide backpay for hours worked (or even not worked) during a shutdown, so “working without pay” won’t have a practical effect on the federal workforce until mid-October, when the first federal pay period would be missed in a medium-term shutdown.

• In the past, this has motivated essential Federal employees to call in sick in lieu of working without paychecks though significant impacts by “call outs” are not expected.

Passports and visas are expected to continue processing during a shutdown as long as there are sufficient fees to support operations.

• Domestic passport agencies within government buildings affected by the shutdown may be closed to the public.

• Calls and inquiries to the National Visa Center and National Passport Information Center will still be accepted.

Business travel can be affected with frequent fliers poised to stay home if their contracts are affected by the government shutdown.

Expect national parks and federal lands to be closed, including restrooms and visitors’ centers, as rangers and habitat managers are furloughed and park services like emergency services, trash collection and road maintenance are hindered. 

Domestic travel via train will continue until AMTRAK’s operating account is exhausted.

The longer-term effects of a short-term shutdown could still create headaches within the airline industry.

• In a recent House hearing, Secretary Buttigieg estimated that around 2,600 air traffic controller trainees would have their training halted in a government shutdown. Ultimately slowing down a process aimed at closing the air traffic controller shortage.

If the shutdown is protracted, we might expect to see it reflected in leisure travel intent and bookings, as families of federal employees assess their household budgets. Even families outside of the federal workforce may rethink travel if there are significant shutdown-related impacts to travel infrastructure reported in the media.