How does the federal government shutdown affect New Mexico’s economy?

With a large federal workforce and high dependency on federally funded aid programs, New Mexico is likely to see more negative economic impacts from the government shutdown than other states, according to economists.

Federal government shutdowns typically cause a short-term dip in the national economy, then the economy usually gets a boost after the shutdown ends, balancing out the decline.

Shutdowns cause disruptions and dampen spending, which are both bad for business, said New Mexico State University economics professor Chris Erickson. The short-term effects for some New Mexican households and businesses could prove lasting, especially if the shutdown drags into November.

Negative economic effects from the shutdown will grow the longer it lasts, according to the nonpartisan Congressional Budget Office.

The longest and most recent federal government shutdown in 2019 reduced that year’s annual gross domestic product by 0.02%, an estimated $11 billion reduction, including $3 billion that will never be recovered, according to the Congressional Research Service. That shutdown stretched 35 days and was during the first Trump administration. At day 19, the present shutdown is still shy of the record.

New Mexico has more than 30,100 federal employees, accounting for 3.5% of the state’s total workforce.

The majority of these employees work in the public administration, health care and social assistance, and transportation and warehousing sectors. New Mexico’s federal workforce earns an average weekly salary of $1,867, according to data from the state Department of Workforce Solutions, though most of these workers will not be paid until the shutdown ends.

Smart Asset estimates roughly 18,000 government employees in New Mexico have been furloughed — or sent home from work — during the shutdown, based on federal employment and population data.

“Federal funds and employment have strong multiplier effects. It doesn’t (just) affect these people … but everybody around them,” said University of New Mexico economy professor Matias Fontenla.

The shutdown began in the middle of a pay period, so for many essential or furloughed federal employees their most recent paycheck was a partial check and “they’re not going to see another nickel of pay until the shutdown ends,” said Randy Erwin, president of the National Federation of Federal Employees.

The union represents many Forest Service and White Sands Missile Range workers in New Mexico.

Federal employees already make an estimated 25% less than people doing the same work in the private sector, according to Erwin, but job security is often considered a good trade-off for a lower pay scale. But Trump administration efforts to impose mass layoffs on the federal workforce earlier this year and during the present shutdown have undermined federal employee morale, according to Erwin.

“We have people who can’t afford to put gas in their tank,” Erwin said. “Once they run out of gas, they’re not going to work anymore.”

Shutting down New Mexico’s National Park Service lands, even temporarily, has consequences for the state’s tourism and visitor spending.

Last year, New Mexico received 2.4 million visitors to its 15 national parks and monuments who spent an estimated $190 million during their visit. The money these visitors spent supported 1,880 jobs statewide in and around the parks, in hospitality, transportation and retail.

National parks could lose more than $1 million in fee revenue every day they are closed, according to advocacy group National Parks Conservation Association.

Active duty service members did receive a paycheck this week, due to a last-minute intervention by the Trump administration, though whether they will continue to be paid as the shutdown persists is unclear.

New Mexico ranks high for participation in the Supplemental Nutrition Assistance Program, or SNAP, with 21% of the population participating in SNAP last year, compared to a national average of 12.3%. SNAP is fully funded through October, but benefits could be delayed in November if the shutdown continues.

“It’s really important to have nutrition and wholesome nutrition for children available on an ongoing basis, and to the extent that the disruption of SNAP leads to child malnutrition … we’ll have to come up with some sort of solution as a society to make sure that children aren’t adversely affected,” Erickson said.

At a standstill on the Hill

The Republican-led Senate has repeatedly failed to pass a temporary spending bill that would fund the government into November at its current level, giving lawmakers more time to negotiate full-year appropriations. Democrats have proposed their own temporary funding bill that would extend health insurance subsidies and reverse some Medicaid cuts made earlier this year.

The House already passed the Republican spending bill in September, and House Speaker Mike Johnson has kept the House out of session, pressuring Democrats to accept the bill without further negotiation.

On Thursday, Senate Majority Leader John Thune tried another tactic, bringing a bill to the floor that would fund defense spending for the next year and ease some of the financial pain of the shutdown. It did not pass.

According to Sen. Ben Ray Luján, D-N.M., the health insurance subsidies are not a partisan issue, pointing out that Rep. Marjorie Taylor Greene, R-Ga., has sided with Democrats to extend the subsidies. He believes that because of Johnson’s unwillingness to bring back the House, negotiating an end to the shutdown could come down to President Donald Trump calling congressional leaders to a negotiation.

“People have to sit down and talk,” Luján said. “I mean, this is about constituents across the country.”

New Mexico Republican Party Chair Amy Barela declined an interview request, but said in a statement that Democrats are “playing political games with the American people’s paychecks.”

“The American people see through this hypocrisy,” Barela said. “Democrats are not fighting for the people — they’re fighting to score political points against President Trump.”