As the government shutdown heads into its second week, in reaction, the Trump administration has gone above and beyond to try to mitigate the economic blow. With millions of federal workers starting to miss paychecks, the administration has reshuffled government payments to ensure that military members continue to receive their salaries. More importantly, several big food programs will keep their funding through the shutdown, at least giving impacted families a cushion.
The effects of the government shutdown reach farther than just worker pay. Some analysts are already warning that the economy may suffer a long-term blow of at least 0.2 percentage points per week. That amounts to about $15 billion (£11.2 billion) in lost economic activity. This decline arrives at a time when companies in almost every industry have started delaying investment decisions, resulting in increased uncertainty.
The Trump administration has threatened extraordinary measures, such as denying backpay to workers and permanently firing them. These are consequences that would deepen the economic pain already experienced by thousands of federal workers. Michael Galletly is with the Utah Department of Agriculture and Food. He expressed fears about being able to put food on the table in these unsteady times.
“I could make it two months, maybe three lean, very lean months,” Galletly stated. And for the duration of the shutdown — still a mystery in the early days — he offered a sense of what many federal workers were feeling. “But I don’t know how long this thing is going to go.”
Due to the government shutdown, many key economic data have yet to be released. Because of this, the monthly jobs report and other essential economic updates are currently on hold. This lack of timely information increases the risk of error for policymakers, who must navigate these turbulent waters without the best available data. As Galletly articulated, “A lot of people tend to look at these things and just hope for the best.” He emphasized his inability to rely on hope alone during this crisis: “Having been through this before – this is my third government shutdown as a federal employee – I just can’t afford to do that.”
Even as things look scary, experts are still a little hopeful. For them, the economic effects of the shutdown may be short-lived and narrowly felt. Wells Fargo analysts pointed out that all past shutdowns, particularly extended ones, have been more limited in scope. They warn that a long-term shutdown presents extraordinary dangers. All of these risks have the potential to undo the consistent progress we’ve made for several years now.
Allison, an economic analyst, echoed this sentiment, stating, “So while the impact of a short shutdown should be minimal, a protracted government shutdown is just another chance we’re taking that could derail the trend of steady growth we’ve been on the last couple of years.” She raised further concerns about what might happen if the shutdown extends through December: “If this continues through December, I don’t know what we’re going to do.”
We have federal workers who are experiencing significant financial strain, and we have businesses who are still facing incredible uncertainty. How long this government shutdown will last, and the long-term impacts on the economy, are unclear. What’s happening today highlights the tenuous line between cynical political games and long-term economic policy.