A Government Shutdown Appears Imminent: Here's How the Average American Would Be Affected
Per the Wall Street Journal, GOP holdouts have defeated House Speaker Kevin McCarthy’s short-term spending bill, which has now increased the chance a government shutdown will occur.
A looming government shutdown poses significant financial risks for American households. From delayed paychecks and federal benefits to travel disruptions and reduced customer service, the impact of a shutdown can be far-reaching and severe. The length of the shutdown is a critical factor in determining the extent of these risks, with experts warning of potential consequences if Congress fails to pass the necessary funding bills for the 2024 fiscal year, which begins on October 1.
A government shutdown occurs when Congress cannot pass the required funding legislation for the federal government. The 2024 fiscal year is set to begin on October 1, and if the spending bills or a continuing resolution are not approved in time, a shutdown will commence on Sunday morning. This year, the potential shutdown is driven by hard-right conservatives in the Republican-controlled House, who are pushing for deep cuts in federal spending.
Accordidng to the Bipartisan Policy Research Center, there have been 14 government shutdowns since 1980, with the most recent being a partial shutdown in 2018-19, lasting 34 days. These shutdowns primarily affect discretionary spending, which accounts for about 27 percent of the federal budget.
The most immediate and direct consequences of a government shutdown include:
Federal Employee Furloughs: More than 2 million civilian federal employees may be furloughed or required to work without pay until the shutdown is resolved, with roughly a 50-50 split between essential and nonessential workers.
Military Personnel Unpaid: About 1.3 million military personnel on active duty would continue to work without receiving pay.
Contractor Payments at Risk: Contractors hired by the federal government may not receive payments for their services, potentially leading to layoffs or furloughs among their employees.
Delayed Federal Benefits: Millions of Americans may face delays in receiving federal benefits, including the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and Supplemental Nutrition Assistance Program (SNAP).
Housing Vouchers and Loans: Section 8 housing vouchers, certain veterans' benefits, and loans for farmers and small businesses could be delayed.
Customer Service Impairment: Reduced staff levels would impair customer service across federal agencies, impacting services from the IRS to the Social Security Administration.
The longer a shutdown persists, the more severe its impact becomes. Key long-term consequences include:
Economic Impact: Reduced government spending on goods and services, coupled with federal employees cutting back on spending due to unpaid work, can harm the broader economy. Consumer confidence may wane, and investors may grow anxious, leading to stock market volatility.
Travel Disruptions: Air travel, including airport security and air traffic control, may be affected as essential personnel may stop coming to work after a few weeks.
Closures and Service Limitations: National parks, museums, and other government services may be closed or operate with limitations.
Data Gaps: Federal agencies that provide economic data, such as inflation and labor market statistics, would cease to do so during a shutdown. This can impact the Federal Reserve's decision-making process regarding interest rates, potentially increasing economic uncertainty.
A government shutdown poses a significant threat to the financial livelihood of many Americans. Journalists must continue to stress this point as they cover the news coming out of Congress, which must pass the necessary funding bills to avert a shutdown and minimize its impact on the nation.
