A NOTE FROM THE AUTHOR: Happy Sunday! I hope you had a good week and you have a good week to come. This week, I did some digging on the news of the government shutdown and wanted to dive into the ramifications of one.
If you’re enjoying the blog, please feel free to share it with family and friends. As always, I am not a financial advisor, but someone who is interested in finance! Thanks!
Background
As I’m writing this, the government is voting on how to proceed with the massive amount of debt accrued. Ever notice how government funding talks pop up later in the year? That’s because the fiscal year for the government begins on October 1st.
According to the New York Times, there are four pieces to this situation:
Government Funding
The Debt Limit
Infrastructure
Social Policy Reconciliation
When bills are pushed through Congress, both parties add their own agenda to the mix. Sometimes they’re not voting for the issue at hand but voting on smaller resolutions throughout the bill where hard lines must be drawn. Here’s one quote I liked from the linked article above.
Raising the debt limit is akin to paying off your credit card bill at the end of the month, because a higher borrowing ceiling allows the Treasury to pay creditors, contractors and agencies money that was already extracted from them in Treasury bonds and notes or contracts. It is not for future obligations.
The last government shutdown occurred from December 2018 to January 2019 over Donald Trump’s construction of the border wall. If the government shuts down, that directly impacts American’s lives. Here’s another quote from Wikipedia on government shutdowns:
Because of the size of the government workforce, the effects of a shutdown can be seen in macroeconomic data. For example, with payment delayed to 1.3 million workers, and 800,000 employees locked out, confidence in the job market decreased but recovered within a month of the 2013 shutdown, and GDP growth slowed 0.1–0.2%. Still, the loss of GDP from a shutdown is a bigger sum than it would cost to keep the government open.
However, the complete effects of a shutdown are often clouded by missing data that cannot be collected while specific government offices are closed.
Consequences
Here are some government services immediately impacted by the shutdown:
National Parks and Monuments
Food Stamp Delivery
IRS Delays
Social Security and Veteran Affairs Applications
As the bill is being voted on, I’m reading that there will be a short-term resolution to keep things running before the issue arises again. Let’s hope that the government stays running.
Fun Fact: Government employees are prohibited from checking their own email from home during a shutdown.
Have a great week!
Jordan