As the partial shutdown of the federal government inches nearer to breaking the record for the longest shutdown in history, the Trump Administration has announced stopgaps to temporarily continue some services that affect millions of Americans – including tax refunds and food stamps.
However, President Trump has threatened that he could keep the government closed for “months or even years” if he doesn’t get funding to build a wall along the U.S.-Mexico border. Experts say that many more Americans will begin to feel affects if the shutdown lasts for even a few more weeks.
People from every corner of American society – from big businesses to families receiving government assistance – could be impacted, experts warn. SNAP, also known as food stamps, is only funded through February. Many mortgage and business loan applications could begin to stall. And particularly complex tax refunds – such as refunds for the Earned Income Tax Credit – may take longer to process.
Here’s what to expect if the shutdown continues to drag on.Tax Refunds
After a flurry of reports that the shutdown could stop tax refunds from going out, the Trump Administration moved to assure the taxpayers that they will receive their refunds as normal.
Russell Vought, the new acting director of Office of Management and Budget (OMB), told reporters on Monday that the Internal Revenue Service (IRS) will begin to process tax returns starting on Jan. 28.
“The refunds will go out as normal. There is an indefinite appropriation to pay tax refunds,” Vought said.
The IRS said in a statement yesterday that the OMB has reviewed the law and found that the IRS can make refund payments despite the lapse in federal funding.
“We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown,” IRS Commissioner Chuck Rettig said in a statement. “I appreciate the hard work of the employees and their commitment to the taxpayers during this period.”
Nicole Kaeding, director of federal projects at the Tax Foundation, says that the IRS will need to ask a large number of employees to come back to work – without pay – in order to process refund requests. Only about 10,000 of the IRS’s nearly 80,000 employees are classified as exempt from a furlough under the IRS’s most recent lapse plan, and it’s not known how many will be asked to return to work.
“It’s not clear what’s going to happen because those employees need to come back,” Kaeding says. “It sounds like even in the Administration it’s not settled.”
Kaeding adds that any delay would particularly impact lower income families, who typically rely more on the tax refunds and often file for refunds earlier than other taxpayers.
John Buhl, a Tax Foundation spokesperson, says that there is concern that the IRS will take longer to complete more complex tasks, such as business tax returns, audits and returns with the Earned Income Tax Credit – and that there won’t be the same level of customer service to answer taxpayers’ questions and help solve problems.
“There’s been concern about how many resources they’re going to bring back,” Buhl says. “They’ll have to prioritize tasks.”Small business loans
If the shutdown continues, it will start to take longer for small businesses to get approved for loans.
Thomas Smith, legal counsel for commercial lender RCN Capital, says businesses are starting to complain that the IRS is taking longer to process routine requests, which are necessary to take out loans. Smith says that while the slowdown has mostly caused “confusion” among businesses so far, he is concerned that the IRS’s backlog of requests will grow as the weeks go on. If that happens, Smith says, businesses may start to miss loan deadlines.
“If this were to continue another two or three weeks, then I think the affect would be significant. Right now it’s a temporary situation,” Smith says.
Businesses that can’t take out loans may begin to need to put off purchases of new inventory, as well as buying and selling property – which could have “ripple effects on the economy,” Smith says.Mortgage approvals and rental assistance
Lower income and first-time homebuyers and renters are also likely to feel the impact of the shutdown.
Some 4.6 million receive rental assistance from the Department of Housing and Urban Development (HUD). HUD’s housing assistance money expired on Jan. 1. HUD sent a letter to landlords asking them not to evict HUD tenants during the shutdown – but such tenants will be in danger of eviction if the government remains closed.
Families with credit scores below 720 may also have difficulty obtaining mortgages. HUD has warned that the “processing of closing of FHA-insured loans may be delayed.” As many as 39,000 loans backed by the Federal Housing Administration or the USDA’s Rural Development Loan program have already been affected by delays as of Monday, according to real estate database company Zillow.
In a factsheet about budget lapses, HUD noted that will be able to conduct a “very narrow range of activities” while the government is shutdown – and that if the shutdown continues, the housing market may be affected.
“With each day the shutdown continues, we can expect an increase in the impacts on potential homeowners, home sellers and the entire housing market. A protracted shutdown could see a decline in home sales, reversing the trend toward a strengthening market that we’ve been experiencing,” HUD wrote.Food Stamps
The SNAP program, which provides food assistance for about 42 million Americans, will be funded through February – but there is no clear plan to fund the program if the shutdown continues into March. U.S. Secretary of Agriculture Sonny Perdue announced on Tuesday that a short-term funding bill will be used to keep the program funded for another month.
“At President Trump’s direction, we have been working with the Administration on this solution. It works and is legally sound. And we want to assure states, and SNAP recipients, that the benefits for February will be provided,” Perdue said.
Ann Flagg, a director for the family assistance nonprofit American Public Human Services Association, says that while SNAP is a federally funded program, it is operated by the states. That means that if the federal government remains closed, states will need to figure out how to make up for the shortfall themselves.
“It will be a state by state decision depending on the resources they have available,” Flagg says. “It’s a big budget hole to fill without federal resources.”
Flagg says that a budget shortfall would have a serious impact on the health and wellbeing of the families who receive food assistance. About 68% of SNAP participants are families with children, and 33% are in families with elderly or disabled members, according to analysis by the Center for Budget Priorities.
A halt to the program would also have an “enormous economic impact” on farmers and small business owners who provide food through the program, Flagg says.