As the threat of a government shutdown looms, analysts and citizens alike are bracing for potential disruptions that could affect a wide range of services and financial stability across the nation. The recent stalemate over spending in the last Congress caused a major stir. Many economists don’t think Democrats and Republicans can agree at the very last minute.
The entire cost of the last complete federal government shutdown—16 days in 2013—was $2.5 billion, which included about 850,000 federal workers furloughed for 16 days. This history has people rightfully terrified of a repetition of such a scenario. In the interim period, about 800,000 federal workers were subject to furloughs or were required to work without pay. As a direct result, they suffered an approximate income loss of $70 billion.
As most people know by now, government shutdowns automatically stop all unfunded “nonessential” functions, an inconvenient truth with devastating impacts. Because most past shutdowns have played out largely over weekends, avoiding significant short-term effects, an extended shutdown would inflict long-lasting damage.
The nation’s long-standing student debt and healthcare subsidy crisis will likely come into focus if the government shuts down. The United States is in the midst of a historic crisis with $1.6 trillion in outstanding student debt. Independent contractors almost exclusively handle this massive debt portfolio. On top of that, about 22 million Americans depend on healthcare subsidies that would cost roughly $30 billion a year to continue extending. These essential functions, and many others, will be put at risk if the federal government cannot come to an agreement.
The administration of President Donald Trump has even threatened to layoff thousands of these non-essential workers if Congress fails to break the stalemate. Such extreme steps would only deepen fears for the jobs of federal workers, while increasing anxiety among the nation’s entire workforce.
Economists do not believe an 11th-hour deal is in the cards between the two parties. Mark Zandi, chief economist at Moody’s Analytics, adds “that’s the fuel for recessions potential, even now.” He warns that if a government shutdown goes on much longer, the fallout will start to threaten economic stability in earnest.
“But if it does, it’s a whole different ball game. The impacts would be very significant, very quick.” – Mark Zandi
In addition to impacting all Americans’ safety, health and security, a shutdown would have dire consequences for everyday citizens. Travel plans will be thrown into chaos, and the mortgage origination process will be held up, particularly for mortgages that need federally-provided flood insurance.
The core of the central bank’s operations would be at risk during a shutdown. Without access to that data, officials would be “kind of flying blind.” Times Series Analyzing crucial economic indicators that guide large policy decisions could take them off the table for too long, delaying necessary action.
The only significant deadline that could compel legislators to reach an agreement is the November 1 open enrollment period for Affordable Care Act (ACA) health plans. Without a fix by this date, millions could find themselves in limbo about their healthcare options.
History reminds us that the United States already experienced its longest shutdown on record. It was the 35-day shutdown that started just before Christmas 2018. Such prolonged inaction would result in “some grievous mistakes” with serious consequences for the economy and for workers, as well as higher borrowing costs.
Chris Krueger, a political analyst, acknowledges that “a shutdown could go for a while,” highlighting the potential for extended uncertainty.
“Though the economy is quite vulnerable [right now]. It’s struggling, especially with regard to jobs.” – Mark Zandi