What Happens If The Government Shuts Down

Monday, April 24, 2017
By Paul Martin

by Tyler Durden
Apr 24, 2017

Saturday, April 29, marks what may be a bittersweet anniversary for the Administration: it is President Trump’s 100th day in office. It could also mark Day 1 of a government shutdown if Congress doesn’t pass a spending bill authorizing funding, or if the president doesn’t sign it before then. This is a risk the GOP will be eager to avoid, although in recent days chatter has again picked up as a result of Trump’s insistence to add wall funding in the spending bill. As noted earlier today, there is virtual unanimity among Democrats to oppose any bill that budgets for a wall, and since passing a new Continuing Resolution would require 60 votes in the Senate, at least some Democratic support is needed.

So while it remains at best a moderate risk factor – Goldman’s latest estimate puts it at about 1-in-3 chance – the question of what happens if the government does shut down at midnight on Saturday is starting to percolate. Here are some thoughts from Citi.

First, threats of a shutdown are more common than actual shutdowns. The last one occurred in October 2013, and the one prior to that was 1995/96. Those that last have an impact on the economy. In 1995/96 the government shut down for 21 days. In 2013, for 16 days. But not all shutdowns are impactful. During the Regan administrations, there were a total of 8 shutdowns with the maximum lasting 3 days.

What is the economic impact?

In 2013, reduction in fourth quarter Gross Domestic Product (GDP) was estimated to be between -0.2 and -0.6 percentage points. 120,000 fewer private-sector jobs created during the first two weeks of October.
A second and important point for markets, federal data collection ceases over this period. Statistical reports will be delayed. This economic uncertainty acts like a tax on confidence. It also makes trading off data releases difficult.

Financial market impacts?

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter