What is a Government Shutdown?
Throughout the history of the United States, the nation has set a repeated precedent of “shutting down” financially any time the two primary parties within the government cannot agree on the federal budget, causing a cessation in federal funding. Now going into the fourth week of the current government shutdown, many Americans are beginning to wonder what is making this shutdown much more complicated than usual and how this will affect day-to-day facets of American life, such as the job market and national economy.
According to CNBC, the last shutdown occurred in 2018, dragging on primarily due to discord surrounding funding Trump’s controversial immigration policies during his first term. This shutdown went on for five weeks, marking itself as the longest shutdown in US history. Yet, as this current shutdown becomes the second longest in national history, are we approaching a new long-lasting record?
What Makes this Shutdown Different?
As we face our current shutdown, the stark contrast compared to those in the past is primarily due to the harshened political polarization between the two parties, following Trump’s second entrance into office. Given these more difficult conditions behind this shutdown, fears are beginning to arise that the US will enter a second month without federal funding- producing vast economic damage.
Economic Impacts We Can Expect
As reported by CNBC, some of the more immediate consequences that we are beginning to see as a result of the fallout from this lapse in funding is cuts to, if not complete cessations, of federal employees’ paychecks. As all non-essential funding is paused until both parties are able to pass a bill in agreement over the federal budget, government employees all over the country are seeing an interruption in their consistent pay. Typically, when experiencing a shutdown, the government will carry out a “backpay” policy where it pays for the lapse in income post-fact for those who were affected by the funding outage, yet this time around the White House is debating whether this policy is necessary, given the government attempts to cut “unnecessary” expenses.
Further, in its efforts to cut these sorts of expenses, the Trump administration has seen mass layoffs of government employees throughout countless sectors. Thus, the combination of these two factors is creating uncertainty within the diminished job market.
As the shutdown continues to drag out, there is a possibility that we could witness loss of funding to social security programs designed to aid low-income Americans. Similarly, the Trump administration is beginning to cut more government program funding, as the shutdown continues, in hopes to force an agreement upon the Democrat party, that has been seen holding out from an agreement, due to hopes of making progress on their healthcare agenda.
J.P. Morgan also notes that due to the shutdown of numerous government programs, the economic sector is witnessing a pause in the publication of official US economic data, making it more difficult for investors, traders, and policy makers to make decisions based on privately published data. Further, this shutdown is also expected to lead to reduced GDP growth and impacts on products linked to government inflation.
Given many of the current impacts we are facing and the projected fallout from this shutdown, many economists and consumers alike are hoping for a swift end to the current government funding cessation. While given the current political environment, it is unclear just when this will happen, marking this issue as a possibly defining moment of Trump’s second white house era. Yet only one real question is currently on the minds of many Americans, “when will this shutdown end?”