When Congress refuses to approve new expenditures for federal agencies—which need congressional approval every year to spend money—a government shutdown results. Four recent shutdowns did not cause stocks to decline but rather to gain.
The government can only spend money on necessities during a shutdown, like public safety and law enforcement-related services. This could cause severe financial hardships for some American families at a time when many are still struggling with high prices due to inflation and impending student loan repayments. It also means that hundreds of thousands of federal workers won’t receive paychecks on time and that others will be furloughed.
A spending agreement must be passed by Congress by midnight on September 30 in order for President Joe Biden to sign it. To give them additional time to talk, Congress might instead enact a continuing resolution by the same deadline. If they don’t, the government will shut down, which could have far-reaching effects.
To keep the government operating as of Monday, Congress had not yet passed any of the 12 appropriations bills that must be signed into law. This is because House Republicans continue to disagree on top-line spending levels and different policy concessions.
House Speaker Kevin McCarthy may be forced to work with Democrats to keep the government open past Saturday night due to a financial dispute with conservative Republican party members. Some House Republicans want expenditure goals for the upcoming fiscal year that are lower than those McCarthy and President Joe Biden agreed upon in May to lift the debt ceiling. The new fiscal year starts on Sunday, October 1.
A shutdown might not affect investors. According to MarketWatch, there have been six government shutdowns lasting five days or longer since 1978, and the S&P 500 index SPX has risen in the four most recent instances.
According to Andrew Lautz, a senior policy analyst at the nonprofit Bipartisan Policy Center, “any shutdown is a bad shutdown.” “Even if it’s just a one-day shutdown.”
If there is no agreement, many government operations that are not “deemed essential to the protection of lives and property” may come to a complete halt. Although the implications of a government shutdown could damage people’s finances in a number of different ways, they are not as severe as the national debt default that the United States narrowly avoided in June.
The most prolonged government shutdown in modern history happened in December 2018, when most operations were suspended for 34 days.
The Margin: Google searches about Social Security and veterans benefits have increased by nearly 5,000% as a result of the government shutdown. Monday earliest
However, visitor services at national parks might be suspended, passport requests might be postponed, and many employees at organizations like the Securities and Exchange Commission might be instructed not to report to work. Other government operations, such as the payment of Social Security and Medicare benefits, would continue in the interim.
The results of a shutdown will affect more people than just federal employees. Here are some of the ways that Americans will be impacted by a federal government shutdown.
Potential Layoffs or Delayed Payments To Federal Employees
Federal employees and contractors, who have nothing to do with political talks over spending, maybe the group most immediately impacted by a government shutdown. (During government shutdowns, lawmakers continue to get compensation.)
Beyond the “hundreds of thousands of federal contractors whose businesses depend in large part on the federal government,” according to Lautz, “there are over 2 million federal employees in the United States.”
Law enforcement officers, national security agents, active duty military people, and federal prison guards are typical examples of the services and individuals that each federal agency determines to be vital. For instance, those employed by the military and federal law enforcement would continue to report for duty, while civilian employees of the Defense Department would be placed on furlough.
Possibly Travel Issues While the Government Shutdown
Workers calling in ill might be a major issue, as it was during the previous shutdown, with air traffic controllers and Transportation Security Administration (TSA) employees obliged to work without pay.
The White House cautioned that travelers might experience considerable delays while describing some of the potential effects of the closure.
Also to be aware of is the possibility of unstaffed or completely closed national parks during a shutdown for those traveling in October and beyond. Government-run museums, art galleries, and zoos, like the Smithsonian, might also be shuttered. Lautz advises making an advance call to confirm.
In a release earlier this week, it was stated that “air traffic controllers and TSA officers would have to work without pay, potentially resulting in significant delays and longer wait for travelers’ times across the country at airports” similar to those undergone during previous shutdowns.
Consolation In Disaster
The Federal Emergency Management Agency (FEMA) has issued a warning that its Disaster Relief Fund is dangerously low and might be exhausted if the government shuts down without passing emergency financing. This comes as disaster relief activities are now ongoing in Florida and Maui as a result of recent hurricanes and wildfires. Representative. Jill Tokuda, who represents the Maui region in Congress, said to TIME in August that “a government shutdown will slow down our recovery efforts.”
Effects On National Parks
During the 35-day closure in December 2018 and January 2019, national parks suffered. Conservationists cautioned at the time that delicate lands could take decades to recover from damage, and many parks remained open but were unstaffed. The National Zoo and Smithsonian institutions in Washington, D.C., were also closed.