Here we go again…although Congress voted to keep the government open, averting a shutdown, it’s just for 45 days.
We should be used to the dysfunction – there have been 21 government shutdowns since 1976. Here are questions that I have fielded about these recurring events:
How would most Americans experience a shutdown?
Federal workers would bear the brunt of the stalemate, with about 500,000 furloughed, and 500,000-1,000,000 being forced to work temporarily without pay. More than one million active-duty military personnel could forego pay during a shutdown.
All government and military worker’s wages will eventually have to be repaid when the government reopens.
For travelers, most national parks and museums would shutter and the process of getting through the airport could get tougher, because TSA agents would be working without pay and some would likely not show up. The same is true of passport applications, which could slow down.
What about Social Security, Medicare and Medicaid?
All three are authorized through separate laws, so checks and benefits would continue to flow. Military pension benefits would be paid, and Veterans’ Hospital facilities would be expected to remain open.
Recipients of other benefits like the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), would likely stop after a few days and Supplemental Nutritional Assistance Program (SNAP) benefits would be impacted if a closure would last longer than 30 days.
Do I get a break on my quarterly tax estimates?
No dice — the IRS fully expects you to pay your taxes. In case you are one of the dwindling few who rely on snail mail for those taxes, post offices would be open and postal workers would deliver your mail!
What is a credit rating downgrade, and should I care about it?
A credit rating measures the ability of a company or a government to repay its debt.
Until 2011, the U.S. maintained the highest rating from all three of the big agencies, Standard & Poor’s, Fitch, and Moody’s.
During the 2011 debt ceiling standoff, S&P cut its rating (and has never restored it), and then in August, Fitch did the same – mostly due to the political dysfunction that has led to these moments. Recently, Moody’s put the world on notice that it could also issue a downgrade.
How does a shutdown impact investors?
A shutdown would not affect the government’s payments to bondholders, but the debate added pain to a rough September, when stocks and bonds suffered.
There is big concern that amid high interest rates, the trifecta of spiking energy prices (up by 34 percent since June production cuts by Saudi Arabia and Russia), restarting student loan payments, and a looming government shutdown could cause an economic slowdown and eat into the gains that stocks have made so far this year.
How does all of this affect the Federal Reserve?
A shutdown could be an issue for the Fed because the collection of economic data would halt. That means that various employment and inflation reports, on which the Fed relies, would not be released.
Without these and other data points, the central bank may be more cautious and do nothing at its policy meeting on October 31-November 1. The Fed could also choose to delay their meeting if they cannot get timely data.
What is the overall economic impact of a shutdown?
The Congressional Budget Office analysis of the 34-day 2018-19 shutdown found that growth (as measured by real GDP) was dented by 0.1% in Q4 2018 and by 0.2% in Q1 2019.
Economists from Goldman Sachs were projecting similar results this time around, with expectations that the trend would reverse in the subsequent quarter, when the government reopens.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
#Jill #Money #Shutdownonomics