Elon Musk Could Lose Billions From Shutdown

A government shutdown could cause federal contractors, including Elon Musk's SpaceX, to lose billions in revenue as agencies would be forced to delay payments if the Republican-led House of Representatives fails to pass spending bills to fund the government past September 30.

The U.S. government spent more than $700 billion on outside contractors—from defense to health care services—last fiscal year, amounting to nearly $2 billion a day, according to an analysis by Bloomberg. Musk's SpaceX alone has won $2.9 billion in government contracts over the years.

The companies will have to brace themselves for being without that government cash if it is forced to close as Congress tries to wrangle a deal to approve spending for federal agencies.

Over the last few weeks, Republican House Speaker Kevin McCarthy has failed to fashion a consensus within his caucus to advance spending bills. A far-right faction in the House GOP conference has blocked several attempts by McCarthy to move forward on the legislation as they demand severe cuts to policies they deem "woke" and removal of aid to Ukraine in its war against Russia.

Even as the Senate has managed to agree on a bipartisan deal to fund the government until November 17, it's unclear that legislation will garner support from Republicans in the House to avert a shutdown.

The prospect of a government ceasing operations has costly implications for the U.S. economy that's already reeling from the effects of high inflation, elevated interest rates and an autoworkers strike. A significant chunk of Americans expect the country to plunge into a recession over the next year and are worried about their finances.

Analysts say that for every week that the government is closed, the U.S. economy would lose up to 0.2 percent of growth. Hundreds of thousands of federal workers will be forced to stay home with no pay, squeezing their pocketbooks just as some will have to start paying back their student loans.

While economists say that most of that loss in growth would be recovered when agencies reopen, the longer the government is shut down, the more time it will take for the economy to bounce back.

A shutdown also would undermine the image of the U.S. as the world's largest economy. Ratings agency Moody's said on Monday that failure to keep the government open could impact the country's credit rating. This comes a few months after another ratings agency, Fitch, downgraded America's credit rating below its top level over a stalemate on the debt limit.

"It would underscore the weakness of U.S. institutional and governance strength," Moody's said. "A prolonged shutdown would be disruptive to the U.S. economy and financial markets, with potential negative ramifications for the sovereign's debt affordability."

For contractors, the larger companies may be able to weather the storm of a shutdown in the short-term, but smaller outfits would be hit hard.

"The larger ones who have been through government shutdowns before are usually prepared and pre-funded," Bloomberg Intelligence analyst Nathan Dean said, "but the challenge is for those contractors that rely on short-term payments and rolling contracts."