Photo by Andy Feliciotti on Unsplash
As the days approached October 1st, 2023, millions of Americans anxiously watched as the threat of a government shutdown came closer with each passing day. Individuals, businesses, corporations, and the entire U.S. economy would feel the effects of this major halt. Fortunately, on September 30th, mere hours before the midnight deadline, President Biden signed a short-term funding bill that keeps the government open through November 17th. In light of this close call, Americans are reminded of the economic repercussions a shutdown has.
The effects of a shutdown ripple through the entire economy. Government workers are immediately affected, as “2.1 million civilian federal workers could see delayed paychecks and roughly 4 million federal contract workers could receive no paycheck” (NPR). Furthermore, certain essential workers continue working without pay as their services are necessary to keep the nation functioning. These hardships are not to be taken lightly, as millions of government employees must bear the weight of their responsibilities without compensation during turbulent times.
This net of uncertainty extends beyond government workers; consumers’ and investors’ decisions are both affected by shutdowns. Due to the uncertainty of government functions and stability, both consumers and investors become risk-averse and limit their budgets. This negatively impacts industries such as retail, hospitality, and tourism since they may lose investors and customers as people cling to their savings. Small businesses are disproportionately impacted since they rely heavily upon their customers’ support rather than private funding and investments. This sequence of events reflects how the ripple effect reaches from consumers to businesses.
One of the most significant impacts of a shutdown is the delay of economic growth. Short-term shutdowns have proven to cause minuscule damage, but prolonged periods of standoff can dramatically slow GDP growth. Additionally, the long-term impacts of a government shutdown may be scarring. Projects are halted, companies may lessen hiring, and economic recovery is impeded. This is why Congress must reach a funding agreement before a shutdown occurs.
While a government closure was averted for now, the November 17th deadline is only weeks away. Americans hope to avoid a similar situation from occurring but are not out of the woods yet. With Congress unable to reach a consensus regarding partisan issues, the possibility of a shutdown continues to loom over the American people and economy.