How the Government Shutdown Hurts NC


A government shutdown is really just a money-sucker, and North Carolina could be one of its biggest casualties as guidances drop, drug development stalls and contractors wait for their checks, reports the Triangle Business Journal.

That’s according to Jim Cox, a professor specializing in securities law at Duke University, who believes that North Carolina, and more specifically the Triangle, has a lot to lose – more so than other parts of the country do.

People already know about the furloughs and national park closures, but that’s where he starts the conversation, citing the closure of the Cape Hatteras National Seashore due to the federal government shutdown.

“That takes money out of the economy,” he says, adding that it’s as simple as that. “The last time around, there were people in certain ranks. … who never got back pay. This is a dead-weight loss on the economy.”

As is the lost tourist revenue, he says. But North Carolina, with its 8.3 percent unemployment rate, well above the national average of 7.3 percent, gets a particularly guttural punch, he points out. This just adds to the revenue shortfall that’s already occurring as a result of unemployed people not spending.

Next, he factors in the public companies, big players in an economy that houses Research Triangle Park behemoths such as IBM, Cisco and Raleigh Red Hat.  When the shutdown ends, expect to see lowered guidances.

“A shutdown takes more and more wind out of sales moving forward,” he says. “As a result of that, it’s going to take a longer time to get back to the tepid pace that we were at.”

While federal contracts will likely be honored in the long haul, longtime federal partners such as IBM might not get their payouts on time, and that could also impact the bottom line.

Stepping out of the technology sector, public pharma giants such as Glaxo Smith Kline, which has its North American headquarters in RTP, and Biogen Idec, which has a manufacturing facility here, could also see dollars lost in delays, as the Food and Drug Administration won’t be working to approve any drugs.

“They’re not working today,” Cox points out. “The engine that is driving the North Carolina economy … is the research money being poured into institutions, whether it’s N.C. State or Duke or UNC.”  Read More.