Federal funding will run out at 12:01 a.m. Sunday, and if Congress can’t reach an agreement, numerous federal functions will be shut down.
The most immediate impact will be furloughs and lost wages for hundreds of thousands of government employees and contractors. Analysts don’t expect a major impact on the entire U.S. economy if a shutdown lasts just a few weeks, but the longer the federal government remains closed, the greater the likelihood of broader consequences.
Here you can see what awaits you.
How much would it cost?
The answer depends largely on how long a government shutdown might last.
The last action lasted 34 days in the winter of 2018-19 and delayed at least $18 billion in spending that resumed after the government reopened. That shutdown cost $11 billion at the time, of which the nonpartisan Congressional Budget Office estimates $3 billion was permanently lost.
The 2018-19 shutdown slowed U.S. economic growth and resulted in an $8 billion decline in real gross domestic product, or a loss of 0.2%, according to the CBO. This time, the Bipartisan Policy Center think tank predicts a shutdown could cost more than $1 billion a week.
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Would a shutdown affect the stock market?
Although investors generally dislike uncertainty, past shutdowns haven’t moved markets all that much. Expectations that the federal government would eventually reopen have largely discouraged investors from making trades based on Washington headlines.
Brian Gardner, who tracks federal politics for financial services firm Stifel, recently noted that markets have risen during the last two shutdowns. During the 2018-2019 shutdown, the S&P 500 rose about 10%. And in the previous shutdown in 2013, the market rose about 3%.
“Other factors will move financial markets, but a government shutdown is unlikely,” Gardner wrote.
What about interest rates?
Federal Reserve Chairman Jerome Powell said on September 20 that a government shutdown “has not traditionally had a major macroeconomic impact.” But the Fed is a data-driven institution that relies heavily on government reports to determine what to do with interest rates. This is a potential risk factor for the central bank as it continues to try to reduce inflation by increasing borrowing costs.
The longer a government shutdown lasts, the more economic data – from price increases to unemployment – is not processed and published as planned.
For example, the next national employment report is scheduled to be released by the Bureau of Labor Statistics on October 6th. Without access to key metrics about the state and direction of the U.S. economy, the Fed could be at least partially flying blind when making its next interest rate decision in November.
How would federal employees be affected?
If Congress is unable to pass a spending bill, the government would be forced to close all federal agencies and programs that are not funded by existing appropriations and are not deemed critical. However, the number of employees who would be affected by these closures may vary and largely depends on whether the government implements the closures fully or only partially. And currently the USA is on the way to a complete shutdown.
A partial shutdown allows some agencies and departments that received full-year funding elsewhere to continue operating, allowing more federal employees to continue working and being paid. But a full shutdown would see a larger share of the country’s more than 2.2 million government workers, which include military personnel, miss their paychecks.
For example, during the 2018-19 partial shutdown, non-essential activities at the Department of Defense and the Department of Energy continued largely uninterrupted because they were funded by a previous bill. In contrast, the 16-day total shutdown in 2013 affected all annual-funded departments and agencies.
The CBO estimates that about 300,000 government employees (or 38% of employees in unfunded agencies) were furloughed in the most recent phase, compared to 850,000 in 2013.
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During the closures, even employees deemed essential would have to work without pay. Back pay for furloughed and working federal employees can only be paid after a closure has ended. And the prospect of going indefinitely without a paycheck could weigh on many households’ spending decisions this fall, just as student loan repayments resume, holiday shopping continues and inflation remains high.
Would consumers and participants in federal programs see an impact?
Essential services would not be disrupted, meaning funding that keeps programs like Social Security and Medicare running would continue.
But other widely used safety net programs could also be affected. Disruptions at the Department of Health and Human Services could result in, for example, 10,000 low-income families losing access to child care through Head Start programs.
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Other non-essential government services could also be affected by speed reductions. TSA agents and air traffic controllers would be expected to continue working without pay, but they could choose to leave their jobs, as some have done during previous closures. If this happens, there could be delays in security lines at airports across the country.
The absence of just 10 air traffic controllers during the 2018-19 shutdown reportedly caused temporary disruptions at major airports in New Jersey, Philadelphia and Atlanta. The U.S. Travel Association, an industry trade group, estimates a shutdown could cause the sector to lose up to $140 million a day.