Interview transcript:
Eric White So let’s get an overview of what you were looking for here in this analysis, 2025 government shutdown under underway. What exactly did you zero in on? Was it geographic or industry?
Chip Lupo Well, it’s interesting because, well, first, Eric, let’s take a look at this at the bigger picture because right now, and the numbers are going to keep growing, the longest thing drags out roughly about 900,000 federal employees have been furloughed, 700,000 are working without pay. And of those 900,00 that have been for furloughs, there’s no guarantee that they’ll have jobs when the shutdown ends, particularly the longer it drags on. So, things such as essential services, air traffic control, military operations, those are continuing. Though, you’re going to see some agencies like the IRS, Department of Education, CDC, they’re going to be slowing operations down primarily from manpower issue. And most importantly, the shutdown is costing the economy what we estimate to be about $400 million per day. So what we try to focus on is like, well, how is the shutdown affecting, each state’s affected differently because federal government has presence of varying degrees in different states and a lot of areas depend more on federal dollars than others. So what we did, Eric, is that we looked at things such as the share of federal jobs per state, and this is including Washington, D.C., obviously, federal contract per capita, percentage of families receiving SNAP benefits, real estate as a percentage of gross state product, we’ll talk about that in a minute because this is interesting because this a common question that comes up is why are we considering real estate in the midst of this government shutdown? And then of course, access to national parks. Now, Eric, you’ve seen numerous government shutdowns and when these things occur, usually it’s the national parks that are the first on the chopping block.
Eric White That it is, and it’s usually the courtesy of B roll that all the TV stations like to run. But those are just one aspect as you mentioned, and you’re looking at the analysis here, you’ve had a ranking system of just how much of how affected each state is going to be. And obviously, D.C. is going to be up there, Virginia, Maryland, all the ones that we are aware are well affected. But what were some of the other high ranking ones that folks may not realize have a large federal footprint, or the federal government has a footprint on them, let’s say?
Chip Lupo Right. Now, obviously, Washington, D.C. is far and away number one because it is the hub of the government and the states that are on the outskirts and the suburbs. With suburbs, Maryland at five, Virginia at six. New Mexico is an interesting one at number three because it’s a very low-income state. So what we found is that a fifth of their population enrolled in SNAP benefits. So now while those payments are currently going out, but an extended shutdown could lead to a huge chunk of those residents struggling to put food on the table if the government doesn’t have any more funds available for benefits. New Mexico also is in an area where there’s a lot of federal land. It’s the seventh highest percentage of federal jobs and the with most national parks per capita. So New Mexico is already struggling economically, there’s high poverty rates, low unemployment. So the government shutdown is going to hit that state particularly hard.
Eric White Yeah, and there’s always those ones out there that you don’t necessarily think of. But, yeah, let’s get back to the actual ranking system itself. You did include real estate, as you had mentioned. What do you mean by including effect on real estate? Does that affect housing prices, land prices? What are we talking about here?
Chip Lupo Not necessarily the pricing, but the metric we use as real estate is a percentage of gross state product. Now, the gross state product, of course, is the equivalent of the GDP, but at the state level. Think about your mortgage processing. A large number of homes are being financed through FHA or the VA. Any types of real estate transactions are going to be, you’re getting the IRS involved. So if you’re giving staff shortages in those particular agencies, that’s going to drag down the processing time. And I don’t know, Eric, if you’ve closed on a house anytime soon, but the process is long enough as it is. And if you got federal agencies involved with an extended shutdown, that could take even longer.
Eric White We’re speaking with Chip Lupo. He’s an analyst with WalletHub. And let’s go to the federal contracting dollars. That’s probably where most of the pain is going to be felt. A lot of people tied for first there, Chip.
Chip Lupo Yeah, in terms of the federal contracting dollars, because there’s a lot of it out there. A lot of states do rely heavily on the federal contract dollars. Of course, Washington, D.C., Virginia, Maryland, top three, as you would expect. New Mexico’s right there. Yeah, tied for first as long in Connecticut, which I thought was interesting also. But Connecticut, Yale University is there. It’s a major, obviously a major prestigious university, there’s a whole lot of federal contracts and a lot federal dollars there, too. So yeah, again, the longer these things drag out, the more these states are going to be feeling the pinch.
Eric White And I want to correct myself from the beginning, we kind of dismissed the effect of not having national parks open. That’s a big deal. I mean, it may not affect the most amount of people and a lot of high populous states, but a national park being closed in a local area, especially during this time of year leaves changing all that good stuff that is captivating for eyesight. Could you just discuss a little bit about your analysis on what national parks closing means for certain areas?
Chip Lupo Right. Now, we’re talking about access to national parks. Now, the first thing in a shutdown is that people tend to think of is the workforce, how much the workforce is going to be cut. And a lot of these people who are furloughed, if they’ll have jobs when the shutdown ends. But yeah, the tourist aspect of it in a lot of these states, particularly some of these low-income states, a lot of these rural sparsely populated states do rely heavily on tourism. So it’s not surprising that Alaska has the highest access to national parks, so they’re going to be feeling the pinch tremendously, along with Wyoming, D.C. right there in the middle, sandwiched in between Wyoming and Montana, and then New Mexico at number five. So yeah, don’t dismiss the tourist aspect again. I’m not so sure that leaf changing is a tremendous deal in any of these states, but you do have wide open spaces. There’s mountains and rivers and huge open air spaces. So with a lot of national parks in these states, so yeah, these people are going to, these states are going to really be feeling it the longer the shutdown drags out.
Eric White And there’s New Mexico again, it’s almost like it’s the D.C. of the west.
Chip Lupo Appears to be, because particularly when it comes to federal dollars, there is a lot of federally owned land in New Mexico. And again, with federal land comes federal dollars. So there’s going to be a pinch felt there for sure.
Eric White And when you say that this is costing the economy $400 million per day, that’s a phrase that is used by analysts like yourself. What does that actually mean? Dollars to donuts, when an economy is losing $400,000,000 a day, that entails what?
Chip Lupo Well, again, when we’re in this post-deflationary economy where things are creeping back up to respectable numbers, it’s going to affect, like I touched on earlier, and it’s going to affect things such as air traffic control, military operations, I mean, they’re still ongoing, but at some point, the longer this thing drags out. Now, if this thing drag so much longer, we could be looking at even more than $400 million a day. And that’s just going to put things such as home buying perhaps at a standstill. The economy is on edge, of course, because no one wants to make significant investments to capital when there’s this uncertainty. We’ve already been in an era of uncertainty with tariffs. So now you throw in a government shutdown on top of it with $400 million a day and counting. People are going to be holding onto their money a little bit longer and not willing to invest.
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