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How Does Government Shutdown Impact U.S. Economy?

October 2nd, 2013 · No Comments · Economy

by Kristy Welsh

(Last Updated On: February 26, 2018)
Though some economists predict the government shutdown may only cut economic growth by a few tenths of a percentage, that's nothing to shrug your shoulders at when growth is just 2.5 percent.

Though some economists predict the government shutdown may only cut economic growth by a few tenths of a percentage point, that’s nothing to shrug your shoulders at when growth is just 2.5 percent.

When the government shuts down, as it did Monday, October 1, 2013, hundreds of thousands of federal workers go home (i.e., don’t get paid). The activities of a number of government agencies shut down, with services the recipients of which simply will not receive. Then there’s the psychological impact of a government shutdown — an uncertainty that affects overall consumer spending, which represents 70 percent of the U.S. economy.

The gist of the shutdown is this. The House and the Senate cannot agree on a bill that outlines how the government should be funded. At the heart of the matter is Obamacare. The Republican-controlled House passed a government funding bill over the weekend, but it delayed Obamacare for a year. As a result, the Democrat-controlled Senate rejected the bill.

As reported by The Washington Post, the government estimates that 800,000 “non-essential” or “non-expected” federal workers are furloughed. This leaves 1.3 million “essential” or “expected” workers still on the job. Active-duty military personnel also still get paid, as do the 500,000 postal workers who will continue to provide mail services.

Government agencies with activities affected by the shutdown include:

  • National Institutes of Health
  • Department of Housing and Urban Development
  • Department of Homeland Security
  • Justice Department
  • National Park Service
  • Environmental Protection Agency
  • Commodity Futures Trading Commission
  • Social Security Administration (though will retain enough staff to keep sending out checks)
  • State Department
  • Veterans Benefits Administration
  • Department of Agriculture (which will cut off support for the Women, Infants, and Children program)

What all of this adds up to is a nation in limbo, and that’s the last thing we need for our slow-to-recover economy. Though some economists predict the government shutdown may only cut economic growth by a few tenths of a percentage point, that’s nothing to shrug your shoulders at when growth is just 2.5 percent.

There have been 17 government shutdowns since 1976, ranging from 1 to 21 days. So the good news is, this could all be resolved any time, if and when Congress can find a way to agree.

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