The odds of a government shutdown are growing even though lawmakers from both parties profess that they want to work out a deal — and that could mean very bad news for America’s economy.
Unfortunately, it isn’t just government workers and certain members of the armed forces who are negatively impacted in the event of a shutdown; in fact, it would be hard to find a person in the country who would not experience negative results from such an event. Following is an overview of some of the major ways a government shutdown would hurt the economy both now and for the foreseeable future.
Grocery stores will be hard hit if the shutdown lasts longer than a few days. SNAP benefit cards will only work for a few days after a shutdown, after which individuals will no longer be able to use them. This means that up to 40 million individuals across the nation will be buying few or no groceries for an undetermined period of time. However, it’s not just SNAP card users that are likely to do less shopping. Hundreds of thousands of government workers will be furloughed without pay, and no guarantee that they will receive back pay once the shutdown ends. While some will likely go into debt over the holiday season many others will probably adjust their budget and spend less than before.
Businesses located near national parks and monuments will also be hard hit. A shutdown will result in these locations closing for business, which means that restaurants, hotels and shops that depend on holiday tourists will be left out in the cold. This will in turn affect the local economy in these cities as business owners who usually have extra money to spend for Christmas now have little or no cash on hand for Christmas expenses. Perhaps the only consolation for small business owners in this situation is that the shutdown will make it hard for people to get passports and travel abroad for the holidays, thus motivating at least some people to travel to other cities instead of out of the country.
Stock owners will also feel the pain. During the last shutdown, the stock market lost about $150 billion dollars. Just the possibility of a shutdown this year is already making investors jittery; if a shutdown actually happens investors the world over will lose money.
What is more, this year’s shutdown could wreak more havoc than shutdowns in previous years. The FED is set to raise interest rates on December 13 and the markets already have plans in place to adapt to this move. If a government shutdown actually occurs and the FED is unable to change interest rates a lot of financial markets will feel the impact as companies and individuals alike scramble to adjust investing plans. In fact, there are warnings that the market reaction will be nothing short of violent if rates aren’t raised as expected.
Unfortunately, the negative effects of a government shutdown aren’t temporary. The last shutdown reduced the GDP by up to .5 percent, and the White House Council of Economic Advisors found 120,000 fewer jobs were created. The real estate market is sure to slump nationwide as the IRS will not process requests to verify borrower’s income and the Federal Housing Administration and Department of Veteran Affairs will stop guaranteeing loans. Fewer home purchases will not only affect real estate agents but also construction companies that hire tens of millions of workers.
While the possibility of a government shutdown at some point has been looming since the beginning of the year, the truth is that the government is now closer than ever to shutting down until Congress and the Senate finds some way to come up with a deal that President Trump will sign. Such a deal is extremely elusive.
The Democrats insist that a spending deal include the enshrinement of DACA into law and provide funding for Planned Parenthood, Obamacare and combating the opioid crises. Republicans, on the other hand, want to avoid adding these demands to a much-needed spending bill — and President Trump has made it clear that he has no interest in passing a “clean” DACA bill along with a spending bill.
As both sides are further apart and less willing to compromise than ever before, it behooves ordinary citizens to do what they can to brace themselves for the possibility of a shutdown either this weekend or in the future.
Regards,
Ethan Warrick
Editor
Wealth Authority
