Food stamps for 38 million low-income Americans would face severe
reductions and more than $140 billion in tax refunds are at risk of
being frozen or delayed if the government shutdown stretches into
February, widespread disruptions that threaten to hurt the economy.
The Trump administration, which had not anticipated a long-term
shutdown, recognized only this week the breadth of the potential impact,
several senior administration officials said. The officials said they
were focused now on understanding the scope of the consequences and
determining whether there is anything they can do to intervene.
Thousands of federal programs are affected by the shutdown, but few
intersect with the public as much as the tax system and the Department
of Agriculture’s Supplemental Nutrition Assistance Program, the current
version of food stamps.
The partial shutdown has cut off new funding to the Treasury Department
and the USDA, leaving them largely unstaffed and crippling both
departments’ ability to fulfill core functions.
The potential cuts to food stamps and suspension of tax refunds
illustrate the compounding consequences of leaving large parts of the
federal government unfunded indefinitely — a scenario that became more
likely Friday when President Trump said he would leave the government
shut down for months or even years unless Democrats gave him money to
build a wall along the U.S.-Mexico border.
The SNAP program is rare among federal initiatives because it requires
annual funding from Congress, even though its existence is automatically
renewed.
Congress has not allocated funding for SNAP beyond January, and the
program’s emergency reserves would not cover even two-thirds of
February’s payments, according to past disbursements. Last September,
the most recent month for which data is available, SNAP disbursed
$4.7 billion in benefits to recipients across every U.S. state.
Lawmakers last year appropriated $3 billion into a “contingency” fund
for SNAP. USDA officials would not comment on the status of the
$3 billion, but if all of that money is still available, it would cover
just 64 percent of February’s obligations.
Agency officials have not said how they would address the shortfall,
including whether they would prioritize who receives food aid or cut
benefits for everyone across the board.
If the shutdown continues through March, there would be no remaining money for benefits.
“We are currently looking at options for SNAP,” said Tim Murtaugh, a
spokesman for the Agriculture Department. “The best course of action
would be for Congress to pass a legitimate appropriations bill to the
president to end the lapse in funding.”
During the shutdown, the USDA office that administers SNAP has sent home
95 percent of its employees without pay, according to a flowchart on
the department’s website.
“People in this country will go hungry,” said Rep. Rosa L. DeLauro
(D-Conn.). “It’s simple. They go hungry. . . . These are working people.
We’re not talking about people who are dogging it.”
The disruption would hurt not only the families that receive the
assistance but also grocers and other retailers where the money is
spent.
Treasury Department officials, meanwhile, are trying to determine what
to do with the flood of requests for tax refunds that will come in next
month.
The Internal Revenue Service has sent home close to 90 percent of its
staff without pay ahead of an extremely busy time for the tax agency.
From late January through March 2 of 2018, the IRS paid out
$147.6 billion in tax refunds to 48.5 million households. That money
could be frozen within the IRS if the refunds are stalled.
Early last year, as part of its contingency planning for possible
government shutdowns, the IRS said it would not issue any tax refunds
during a shutdown. Treasury and IRS officials have not said they will
completely suspend all tax refunds next month, but a senior
administration official said such disbursements would be severely
affected and likely slowed if they are paid.
House Ways and Means Committee Chairman Richard E. Neal (D-Mass.) sent a
letter to Treasury Secretary Steven Mnuchin on Friday asking him to
detail the impact of job cuts at the IRS and how the tax filing season
will be handled during the shutdown.
“Please confirm whether the IRS will issue federal tax refunds at any
time during government shutdown,” the letter said. “If so, please
provide the anticipated date when the IRS will be issuing refunds.”
This could have an immediate impact on the economy, as well as on the
finances of millions of Americans who frequently spend their tax refunds
soon after receiving them.
“The IRS will finalize and release its filing season lapse plan in the
coming days,” said a Treasury Department official, who, like others,
spoke on the condition of anonymity because he wasn’t authorized to
discuss the internal planning.
Under normal schedules, tax returns for income earned in 2018 would be
due April 15. People who anticipate receiving a tax refund — meaning
they overpaid their taxes last year — tend to file their taxes as early
as possible to recoup the funds quickly.
“It would be a huge political and economic hit for people who are
expecting their $2,500 or $3,000 refund to not be able to get that
money,” said Mark Mazur, a former top IRS official who served at
Treasury during the Obama administration.
Trump has said he is willing to keep agencies shut down as long as
necessary to force Democrats to appropriate several billion dollars for
the construction of walls along the Mexico border. But some Republicans
have said they are uncomfortable with this approach, and several this
week sided with Democrats in their effort to reopen agencies
immediately.
The scale of the consequences also reflects a deep disconnect between
Trump, who has largely cheered on a prolonged shutdown, and the
officials running federal agencies, who are trying to minimize the
fallout.
“If we have to stay out for a very long period of time, we’re going to do that,” Trump said Friday.
White House officials have not fully briefed lawmakers on the expanding
consequences of the government shutdown, leading to confusion about what
happens as each week goes by.
Neal said that the IRS is considering bringing staffers back to work in
the coming weeks to help deal with tax filings but that it’s unclear how
the agency will proceed. These employees would have to work without pay
unless Congress passed an emergency funding bill. He said delays in tax
refunds would lead to “more anger, for something that can be solved.”
Rep. Mark Meadows (R-N.C.), a top House conservative who had cheered
Trump’s approach in the political confrontation, said he was unaware
that there would be any impact on SNAP benefits.
He said he was convinced this money was automatically appropriated by Congress: “Food stamps go on regardless,” he said.
This is not the case, however, according to several senior administration officials.
Meadows said he was “not downplaying the potential consequences of a
shutdown,” but said the whole situation could be easily resolved if
Democrats would appropriate several billion dollars for the border wall.
The government shutdown began Dec. 22 after Trump blocked a bipartisan
deal to fund numerous federal agencies through Feb. 8 because he wants
more than $5 billion to construct 200 miles of wall along the border.
During his campaign and earlier in his presidency, Trump said the wall would be paid for by Mexico. That has not happened.
The shutdown began with an acute impact, cutting off funding to pay
800,000 federal employees, closing national parks and museums, and
limiting federal services. The workers are expected to begin feeling the
consequences of the shutdown more sharply next week: They will miss
their first paychecks on Jan. 11 if a resolution isn’t reached.
“A month into this, we’re going to see people start to get evicted and
their cars start to be repossessed,” said David Borer, general counsel
for the American Federation of Government Employees, which represents
750,000 federal employees.
And a much broader part of the federal bureaucracy is expected to begin grinding to a halt in February, absent a resolution.
Nonprofit groups have been able to patch together money to keep certain
parts of the government open for several weeks, but it’s unclear how
much longer they can hold on. And none has sought to replicate the level
of funding that would be lost if SNAP runs out of money or tax refunds
are stalled.
“That’s scary, really scary,” said Lyman Hafen, executive director at
Utah’s Zion National Park Forever Project, a nonprofit partner of one of
the country’s most scenic parks. “It’s not a good situation without
that support. We’re just taking it a day at a time, a week at a time.”
The cumulative impact of these changes could have a major impact on the economy.
Joseph Brusuelas, chief economist at RMS U.S., an accounting and
consulting firm, said a prolonged shutdown would shave an entire
percentage point off the U.S.’s economic growth, in part because of an
“uncertainty tax” that would freeze spending by households and
businesses.
“If one doesn’t know what’s going to happen with respect to their own
income . . . there will be a pull back on the purchase of big-ticket
items,” he said. “Large firms will pull back on outlays on software,
equipment and capital.”
