DOD Carriers Unlikely to Recoup All Losses Caused by 16-Day Government Shutdown
This story appears in the Oct. 21 print edition of Transport Topics.
Carriers that haul munitions, explosives and other hardware for the U.S. military and saw tonnage evaporate during the partial government shutdown that ended last week said they can’t fully make up their losses.
The carriers had to idle drivers during the 16-day shutdown when the military stopped taking deliveries because civilians who process incoming loads at installations around the country were among the 800,000 federal employees furloughed.
“What you lost during those two weeks, you might get a percentage of it back by increased volume, but you only have so much capacity; once it’s filled, it’s filled,” said Dan Jeffries, owner of Prestera Trucking Inc. in South Point, Ohio, where 70% of the loads are for the military.
“We’ll be back to work but . . . we just hope we don’t face it again come Jan. 15,” Jeffries added.
Under the Oct. 16 measure approved by the U.S. House and Senate and signed by President Obama to end the shutdown, government operations will be financed through Jan. 15 and the debt limit will be raised until mid-February.
During the shutdown, most freight continued to move along highways and rails and was processed at ports by customs inspectors who are exempt from furlough during a shutdown.
The major exception in the trucking industry, though, was for fleets such as Jeffries’ that service the U.S. Department of Defense, which last year spent roughly $1.9 billion hiring private carriers to run in the continental United States.
The shutdown will cause “an unknown amount of loss to the carriers that support the Department of Defense,” said Bill Wanamaker, director of government traffic and security operations for American Trucking Associations.
“It’s very difficult to calculate, but you cannot shut down operations, you cannot have trucks idled without losing some amount of revenue in the long run,” Wanamaker said.
There will be a backlog of freight for the carriers to move for the military, but it may not move as efficiently and some freight may have to be expedited to help the military catch up on deliveries, Wanamaker said.
Jeffries said the military may find itself with shortages for a time because the number of carriers in the munitions-hauling business is limited.
The shutdown also is expected to affect the nation’s gross domestic product, although the economic damage will be contained to the fourth quarter, said Bob Costello, ATA’s chief economist.
“I’m glad we didn’t shoot ourselves in the foot and not raise the debt ceiling, so that’s a positive,” Costello said. “The negative is we could be doing all this again early next year.”
The absence of a long-term agreement on the nation’s fiscal problems is fueling the kind of uncertainty that squashes the risk and investment necessary to economic growth, Costello said.
“So in our industry, you don’t hire more people, you don’t buy more equipment, you just wait to see,” he said. “You only do what you’ve got to do.”
The same uncertainty can be found in households among consumers, he said.
“They’re like, ‘Gosh, what’s going to happen come January? Do we want to go buy that new car?’ I’m not saying they won’t do it, but you certainly think about it more than you might otherwise,” Costello added. “It’s another variable to be concerned about, and we don’t need that.”
Economists differ slightly on how much the GDP will be affected.
Standard & Poor’s Ratings Services estimated the shutdown shaved at least 0.6% off the fourth-quarter GDP, subtracting $24 billion from the economy, Bloomberg News reported.
Costello pointed to a report released last week by Macroeconomic Advisers that he said best summarizes what the recurring political impasses over spending have cost the nation.
Since late 2009, fiscal policy uncertainty has “lowered GDP growth by 0.3 percentage points per year, and raised the unemployment rate in 2013 by 0.6 percentage points, equivalent to 900,000 lost jobs,” the report said.
