Shutdown Begins to Hit Home Across the U.S.

WASHINGTON —  The 19-day federal government shutdown began rippling through the country and the economy this week, touching everything from federally subsidized unemployment benefits to education aid for veterans.

The effects of the shutdown have spread gradually during the holidays, customarily a slow time in the public and private sectors. But this week the pace quickened and the closure is being felt in everything from restaurants and tourist businesses to toxic waste cleanup.

Although federal and state officials said that, by and large, serious emergencies do not appear imminent, those monitoring the situation said the effects are spreading and becoming more noticeable.

In Kansas, for example, the state has closed its federally funded unemployment insurance program, leaving 13,000 laid-off workers without checks and about 1,900 more unable to apply for new benefits, Labor Secretary Robert B. Reich announced.

At the other end of the economic spectrum, many businesses are unable to obtain needed export licenses or are being left with no way to obtain required federal approval of special imports or other transactions.

To aid federal workers who have been denied paychecks, creditors and banks in many sections of the country are providing them with loans or temporary grace periods.

Critics insisted that the impact of the partial shutdown is still relatively modest. Carol Wait, director of the Committee for a Responsible Federal Budget, contended Wednesday that most of the effects so far have been mild and pale in comparison to the broader budget-balancing question.

“There are some very serious fundamental issues at stake here” in the budget debate that far outstrip the question of whether a national park can remain open this week or next, Wait said. Those questions, however, are being made to appear insignificant by the emphasis on the effects of the closed offices, she said.

But budget analysts warned Wednesday that if the standoff continues for even a few more days, the impact will spread to larger and larger slices of the American economy and stopgap solutions will be more difficult to achieve.

Reich, for example, warned at a press conference that eight states, including Kansas, have depleted their federal funds for unemployment benefits and another five are expected to run out of money this week. California is not among them.

Several federal agencies reported that they have begun to halt contracts with private companies that provide supplies or services for federal programs. The White House Office of Management and Budget said no overall estimates are available.

Bill Carberry, regional contract manager with a company called Ecology and Environment Inc. in Woodinville, Wash., said he is among 34 people furloughed because the Environmental Protection Agency has been unable to make payments on the company’s contract, under which it responds to oil and chemical spills.

“I’ve never seen a situation like this,” he said. “Really, it’s anybody’s guess when it’s going to end.”

At the White House, President Clinton, seeking to turn up pressure on Congress, read aloud a list compiled by the OMB that shows that the federal Meals-on-Wheels program for the elderly will run out of money this week.

The list also included these items:

* Half the money in the Head Start program for preschoolers in poor neighborhoods will be used up by the end of the month.

* Medicaid funds for nursing-home care, pregnant women, the disabled and poor children will be exhausted by the end of this month.

* About 170,000 veterans did not receive their checks for educational benefits in December.

* The Federal Emergency Management Agency program that provides food and shelter for disaster victims has run out of money.

Spokesmen for the U.S. Marshals Service said they fear about 2,500 court-security officers may not report for work after mid-January because the budget stalemate has cut off their pay, extending the impact of the shutdown to the federal judiciary.

And the Judicial Conference of the United States, which comprises senior judges from across the country, warned that the federal courts have almost depleted their reserve funds and will run out of money to operate soon.

Officials at the Peace Corps told The Times that they have only enough money left to keep volunteers overseas through Jan. 18. If the shutdown has not ended by then, the volunteers will be brought home.

A survey by Times staff writers in Washington and around the country found that:

* The Immigration and Naturalization Service has had to halt investigations into the hiring of illegal immigrants.

* The EPA has halted all enforcement action and has shut down toxic waste cleanup programs at 32 sites across the country.

* The Centers for Disease Control and Prevention reported that it no longer can keep up with a flu outbreak in the Midwest, raising fears of a spreading health problem in that region of the country.

* Processing of applications for federally insured home mortgages is slowing visibly because of staff cutbacks.

* The National Institutes of Health has stopped enrolling new AIDS patients in clinical trials across the country, raising the possibility that final results of those studies may be delayed as well.

* State Department operations overseas have been slowed. Department spokesman Nicholas Burns told reporters that embassy personnel are now processing only emergency requests for visas and have had to stop paying bills from foreign suppliers.

In addition, about 200,000 Americans are having to wait until the impasse is over before they can obtain passports needed for foreign travel. Processing of passports has been all but shut down, and a backlog is building up rapidly, State Department officials said.

* Government agencies have slowed down their work compiling economic statistics that are used by policymakers and economists to take the pulse of the economy. For example, the Labor Department’s report on unemployment in December--scheduled for release Friday--will not be ready on time.

* With the Commerce Department no longer functioning, U.S. manufacturing firms are unable to obtain export licenses, forcing them to renege on back orders on a variety of time-sensitive shipments.

Importers also have been affected. Warren Stickle, president of the Chemical Producers and Distributors Assn., said his organization’s member firms have millions of dollars of imported pesticides waiting on docks for EPA permits.

The longer the importers have to wait, the more it throws off schedules for farmers, food companies and transportation firms, Stickle complained. “This is the part of the private sector where people are really getting hurt,” he said.

And the shutdown is holding up approvals of corporate mergers by the Justice Department and other agencies, such as the Federal Communications Commission.

In some cases, the closing of national parks has begun to spill over into the tourist industry. About 100 fishing guides in the Florida Keys have been hit hard by the shutdown of the Everglades National Park, at the tip of the state.

“I personally have lost about $4,000 in bookings,” said Hank Brown, an Islamorada, Fla., fishing guide. “The government employees will recover,” he said, “but for us, once a day is gone, it’s gone.”

These developments came as a federal judge in Washington turned down requests by two unions representing federal employees, which sought to bar federal agencies from asking their workers to continue on the job without pay during the budget impasse.

U.S. District Court Judge Emmet Sullivan ruled that granting the injunction would “create a crisis” by forcing the government to close completely. About 280,000 federal workers have been idled and 580,000 more are working without pay, although Congress has promised to restore missed paychecks after the crisis is over.

Contributing to this story were Times staff writers Ronald J. Ostrow and Marlene Cimons in Washington and Times researchers Edith Stanley in Atlanta, Doug Conner in Seattle, Anna Virtue in Miami, Lianne Hart in Houston and John Beckham in Chicago.

* LOCAL IMPACT: How the federal shutdown has hurt Southland workers. B1