A government shutdown could be just days away. This means that hundreds of thousands of federal workers might not get paid, and many services could be delayed. The root of the problem? Congress hasn’t agreed on funding for the fiscal year that starts on October 1.
When the government shuts down, it usually hits the economy hard. EY-Parthenon’s chief economist, Gregory Daco, estimates that each week of a shutdown costs the U.S. about $7 billion. This is especially concerning as the economy is already under pressure. Investor and consumer confidence may take a hit too, further complicating an already rocky economic landscape.
Historically, shutdowns aren’t a new issue. The U.S. has faced 14 since 1980. The longest one lasted over 34 days from December 2018 to January 2019. Such disruptions occur when Congress fails to pass spending bills or continuing resolutions to keep the government running. Wayne Winegarden, an expert from the Pacific Research Institute, remarked, “We’ve been to this picnic before.” He highlighted that while essential services like Social Security and Medicare will continue, the longer the shutdown lasts, the more significant the disruptions will be.
Impact on Federal Workers and Services
During a shutdown, many federal agencies cannot spend money without congressional approval. This leads to furloughs for many workers. Essential employees, like those in public safety, will continue working but won’t receive pay until the funding is resolved. While some federal workers eventually receive back pay, many face financial struggles in the meantime. During the last major shutdown, around 800,000 government employees went weeks without pay, causing many to rely on food banks or crowdfunding for support.
The Broader Economic Effects
The fallout from a government shutdown can extend well beyond federal employees. Delays in federal procurement for goods and services affect businesses and the economy at large. Daco warns that a shutdown could shake consumer confidence and impact markets. With the labor market already showing signs of vulnerability, this added uncertainty could threaten stability. “We need more certainty in the rules of the game of the economy,” Winegarden emphasized, highlighting the risk of more significant economic turmoil.
A shutdown could also delay important economic data. For example, the upcoming jobs report on October 3 could be postponed, complicating monetary policy decisions made by the Federal Reserve. Daco points out that in challenging economic times, a government shutdown poses greater risks than when the economy is robust.
What About Social Security and Other Services?
Programs like Social Security, Medicare, and Medicaid are safe during a shutdown since they rely on mandatory spending that Congress has already approved. Nevertheless, services at the Social Security Administration may face disruptions. Max Richtman from the National Committee to Preserve Social Security & Medicare noted that things like customer service and benefit verifications could be affected.
In terms of federal functions, agencies like the Transportation Security Administration and air traffic controllers will work without pay, as they provide essential services. However, the U.S. Postal Service remains unaffected since it is self-funded, ensuring that mail and packages continue to be delivered.
Some areas will see delays, like mortgage processing events that rely on federal flood insurance, which will pause until a funding agreement is reached.
Final Thoughts
Government shutdowns reveal the complexities of balancing funding and services. As workers brace for uncertainty, the effects on the broader economy can resonate for months. Keeping an eye on congressional actions will be crucial.
For more details, you can check further insights on fundings from Bipartisan Policy Center and Committee for a Responsible Federal Budget.
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Government Shutdown
