January 24, 2019

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1 big thing: Small businesses feel the shutdown pain

Illustration: Sarah Grillo/Axios

The check isn't in the mail: 800,000 federal workers are set to miss their second payday this month, with no reprieve in sight as the shutdown approaches Day 35.

Why it matters: The drought of federal worker paychecks — not to mention the contractors who will never be repaid for their furloughs — is starting to sting surrounding businesses, with escalating dangers for the broader economy.

  • A Philadelphia store owner who serves federal workers told KYW Newsradio that the workers will eventually get paid, but his shop won't recoup the lost business.
  • “We’re actually going to have small business, very soon, impacted negatively because we can’t get an SBA loan,” Huntington Bancshares Inc. Chief Executive Officer Steve Steinour told WashPost today.
  • The AP reports: "It’s hard to know just how much the shutdown is depressing consumer spending because the Commerce Department, which compiles and reports such data, was itself closed by the shutdown."
  • The bottom line: "[A] sustained decline in sentiment raises the probability that consumer demand further slows in the near term," Bank of America economists said today, per Bloomberg.

The big picture: 40% of American adults couldn't afford a $400 emergency, according to Fed data released in 2018.

  • Now imagine that your emergency is two missed paychecks in a row, when you've done nothing wrong on the job.
  • Then imagine how — when you eventually get back to work and get your backpay — how your spending habits could change if you were in that position.
  • As those Bank of American economists note: "[L]ost consumption may not be fully made up once the shutdown ends as we find the consumer more cautious in their spending habits."

What's next: The two Senate bills to re-open the government both failed today.

P.S. Secretary of Commerce Wilbur Ross, with a net worth in the hundreds of millions, said on CNBC today he doesn't "quite understand why" federal workers are going to food banks instead of getting loans to survive the "liquidity crisis."

  • "These are basically government-guaranteed loans because the government has committed, these folks will get back pay once this whole thing gets settled down."

Bonus: Pic du jour

Photo: Mark Wilson/Getty Images

Former California Governor Jerry Brown and former Secretary of Defense William Perry unveil the Doomsday Clock, which remains unchanged and is set at two minutes to midnight.

2. What you missed

  1. Elizabeth Warren is planning to propose a 2% "wealth tax" on Americans with more than $50 million in assets and a 3% tax on those with more than $1 billion, an economist advising the senator told the Washington Post.
  2. China's ambitious Belt and Road Initiative has the potential to forever alter the biodiversity of key habitat on multiple continents, a new study warns.
  3. CNN's Jim Acosta is writing a book titled, "The Enemy of the People: A Dangerous Time to Tell the Truth in America." Details.
  4. Brazilian President Jair Bolsonaro brushed off a series of questions about his history of sexist, homophobic comments as "just playful remarks." Go deeper.
  5. The Senate Intelligence Committee has subpoenaed Michael Cohen to testify in mid-February for what would likely be a closed-door hearing. Go deeper.

3. 1 book thing

E.L. James in Paris in 2018. Photo: Francois Mori/AP

"The author of the blockbuster 'Fifty Shades' trilogy has an 'erotic love story' coming out April 16 ... called 'The Mister,'" AP reports.

  • "James, whose 'Fifty Shades' books have sold more than 100 million copies and launched a billion dollar movie franchise, says 'The Mister' is a modern fairy tale."
  • “It’s a Cinderella story for the twenty-first century."