The Hidden Victims of the Shutdown

 | Oct 13, 2013 | 9:30 AM EDT
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While the Defense Department may be calling back some civilian workers, in other sectors the shutdown has been accelerating. Last Friday the Nuclear Regulatory Commission (NRC) and the Energy Information Administration (EIA) announced that, effective immediately, they would no longer support non-essential services.

According to the NRC, approximately 3,600 of 3,900 NRC employees were furloughed, and resident inspectors at the nuclear energy facilities were retained. Nevertheless, "no furloughed employee is permitted to perform official duties until Congress passes a government funding measure and the president signs it."

Most Americans believe these furloughs are not a serious problem. They have been socialized to the idea that no harm will be done to federal employees or to the economy. After all, federal employees will ultimately be compensated for any lost time and benefits. As far as anyone can tell, furloughed employees are on paid vacations.

As evidence, they point to House Resolution 3223, the "Federal Employee Retroactive Pay Fairness Act." It is a simple one-page bill that passed the House by a 407-0 bipartisan vote.

Here is the entirety of the bill:


To provide for the compensation of furloughed Federal employees.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


This Act may be cited as the ''Federal Employee Retroactive Pay Fairness Act''


Federal employees furloughed as a result of any lapse in appropriations which begins on or about October 1,  2013, shall be compensated at their standard rate of compensation, for the period of such lapse in appropriations,  as soon as practicable after such lapse in appropriations  ends. 

Passed the House of Representatives October 5, 2013.

This bill currently sits in the Senate. It is expected to pass, and President Obama is expected to sign. As far as anyone can see, all is well.

Unfortunately, that is not true. Many Americans are unaware that most government work is performed by contractors, including such large integrators as Science Applications International, Northrup Grumman (NOC), Lockheed Martin (LMT) and Booz Allen Hamilton (BAH). Also among these entities are research institutions, non-profit organizations, universities and hundreds of privately owned small companies.

Not only is the federal government furloughing employees, but they are also issuing stop-work orders to their contracting organizations. As a result, many contractors cannot afford to carry specialized staff on their overhead and they, in turn, are forced to furlough their employees.

Look again at the "Federal Employee Retroactive Pay Fairness Act." Notice that it does not cover private-sector employees.

Unlike their federal counterparts, many private-sector employees earn meager pay and benefits. Younger employees have their college degrees, student loans, $30,000 to $40,000 a year in salary and what remains of their two weeks' vacation time. They do not have margin to give. Worse, it is clear Congress has no intention of undoing the damage the shutdown has inflicted on the private sector.

Many do not realize it, but a number of federal programs have as many private-sector personnel as they do federal employees. To get an idea, look at the NRC's contracts. The Commission has approximately $1 billion worth of active contracts, spread over 375 contracting organizations. Up until last Friday, most of these contracts required companies to commit specialized technical analysts to the federal government for several years. Last Friday, those same contracts should have received "stop work" orders.

What is puzzling is that most funding for the NRC's operations does not come from taxpayers. According to the NRC's fiscal 2013 Congressional Budget Justification, approximately 88% of the Commission's $1.0532 billion budget -- or $924.8 million -- comes from industry.

Since 88% of the NRC's funding comes from nuclear utilities and other private organizations, it seems there would be little justification to furloughed 92% of its industry-paid staff. Industry did not shut down. Industry did not threaten to stop paying the NRC. Yet the NRC rejects industries' payments and furloughs thousands of employees.

Both political parties claim they want to create jobs. Every day, more jobs are being lost as one end of Pennsylvania Avenue argues with the other.

Last Friday it was the NRC and the Energy Information Administration, but there were other agencies adding to stop-work orders. One of the nation's largest federally funded research-and-development centers (FFRDCs) claims it has lost work for almost half of its 5,000-plus employees. More stop-work orders are expected next week.

Eventually, these job losses will have to appear in the economy. It will not be just in Washington, either -- many private sector's furloughs are spreading across the nation.

When it comes to the government shutdown, the public has been misinformed, and this is not the first time: The same thing happened during the Clinton Administration. As with today's shutdown, the federal employees had been protected, but the private-sector employees paid a heavy price.

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