Government Shutdown

Unless something happens this afternoon, the much talked about government shutdown will happen tonight at midnight.  This isn’t the first time this has happened, last happening twice in the 1990’s during Clinton’s presidency.  But what does it really mean?  Among other things:

  • National Parks would close
  • IRS call centers would close
  • Veteran’s disability claims would be on hold
  • No passport issuance or renewals would occur
  • Schools and utilities in Washington, DC, (not to mention the Smithsonian and other museums) which are federally funded, will close doors

NOT affected, though you may hear otherwise, are air traffic controllers, the post office, social security, and federal prisons.  Generally the military’s pay is delayed in a shutdown, but this was one bipartisan concession over the weekend, and it will not be affected in the event of a shutdown.

This may not sound like it affects you very much, but it ultimately affects many, many people’s jobs and income.  In addition, uncertainty causes businesses and consumers to hold off on spending.  When all of that happens, it harms the US Gross Domestic Product (GDP).  If there is a short (a few days) shutdown, the economy won’t be affected by much at all.  However, if it lasts a few weeks, economists predict that GDP could go down as much as 1.4% for the fourth quarter.   When you consider that GDP is generally around 2.5%, you see that 1.4% is BIG.

Why is this happening this time around?  The bottom line is the Affordable Care Act (ACA aka Obamacare).  This is the line in the sand and Republicans feel that the ACA is not needed nor wanted by their constituents so they want to withhold funding for it in the federal budget, while the Democrats feel the opposite.

What is going to happen?  I don’t have a crystal ball, but my guess is that, this afternoon, Congress will pass legislation to delay the shutdown for a week and give them all more time to wrangle.  Whether or not that happens, over the next few days there may be some amendments to the ACA, and then everyone will be happy – okay, not happy, but they will come to some agreement.  The stock market, which hates uncertainty, will swoon until the budget is passed, and then it will jump.  But, looming soon on the horizon there is another fight, this time over the debt ceiling.  More on that, if necessary, in my next update.

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